Implementing Blockchain in BFSI: Challenges and Opportunities

Blockchain is a digital, immutable, transparent and distributed ledger system that records transactions chronologically in near real time. The blockchain records are immutable, transparent and accessible to all participants. Since it is immutable, no changes can be made once a transaction is recorded, ensuring data integrity and security while reducing opportunities for fraud. As such, Blockchain is a shared network where “value” in the form of high-quality records is exchanged over the internet between participants stationed in any part of the world without an intermediary (Christidis and Devetsikiotis, 2016)

The main benefits offered by Blockchain technology include decentralization, transparency, traceability, data security and a high degree of data encryption.

Roadblocks in the use of Blockchain

Blockchain adoption is at a very early stage, so there are many challenges. Although there are still many open questions about Blockchain, the technology and its applications are very promising. If we talk about the most critical of the many challenges for its successful adoption, one would be the lack of regulation and compliance specifications.

The other key challenges include a lack of knowledge and awareness among stakeholders, due to the rapid development of Blockchain and the challenges associated with operational and cultural integration across organizations and stakeholders. The challenges can be broadly classified under technology, social, political and policy, economic, intra-organizational and inter-organizational.

• Technology – Immutability and immaturity of the technology, Power consumption, lack of suitable platforms
• Social – Potential use of multiple identities, privacy concerns
• Political and politics – the lack of national regulations, guidelines and commitment
• Economic – large initial investment, maintenance cost
• Intraorganizational – The lack of management commitment and technology readiness, financial constraints
• Cross-organizational – Lack of participation from business partners, problems and disagreements in cooperation and information sharing

While a significant population around the world is yet to understand and experience the concepts and benefits of digitization, the idea of ​​bringing Blockchain into the mainstream is a challenge.

Where are the opportunities for Blockchain?

Blockchain shows enormous potential in the financial industry, especially in the banking and insurance sectors. Most of the progress that has occurred so far has been realized through collaboration and partnership between the major FinTech enablers such as financial institutions, FinTech startups and technology companies. In addition, many large non-financial companies are increasingly inclined to adopt Blockchain to innovate and improve the efficiency of their traditional business processes.

Several companies and enterprises have already tested Blockchain’s real-world applications in the areas of international trade finance, international payments, bill discounting, supply chain finance, loyalty program management, and digital identity conversion and verification. Similarly, many financial institutions are pioneering the adoption of Blockchain in their regular products, services and processes.

The main goal of most of these early adopters is to explore Blockchain’s potential as an alternative to achieve greater efficiency, effectiveness and coverage through innovation in products, services and processes.

Blockchain has the right reins to change the course of finance.

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