BankChain, the consortium of banking majors including SBI, ICICI Bank and DCB Bank has completed work on its first blockchain project. A blockchain is a decentralised and distributed digital ledger that records transactions across many computers in such a way that the registered transactions cannot be altered retroactively.
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Named as Clear-Chain (c2), it is a permissioned blockchain for integrated and shared KYC, AML and CFT (Know Your Customer, Anti Money Laundering and Countering the Financing of Terrorism). The Version 1.0 alpha 1 of Clear-Chain was released on 27 April 2017.Records are available to all members as soon as they are entered into Clear-Chain. It also has a regulator node which provides regulators with granular access to Clear-Chain data.
BankChain will enable banks to explore, build and implement Blockchain solutions which can minimize fraud and maximize efficiency, security & transparency.
“The benefits of blockchain technology grow exponentially as the number of collaborators increase.That’s why we can see traditional competitors like banks and insurance companies forming consortia to explore a new technology. Once implemented, the benefits of blockchain technology include maximization of efficiency, security & transparency and minimization of fraud,” said Shinam Arora, CEO, Primechain Technologies, the company that is powering blockchain in the consortium.
Most banks are working on solutions around blockchain technology.
“We want to develop the largest blockchain platform in the world and are setting up a Collaborative Innovation Centre. We have launched SBI National Hackathon for startups and developers who are working in emerging technologies like blockchain, artifical intelligence, machine learning. For blockchain in particular, we will not get fruition without the involvement of other banks,” said Sudin Baraokar, head, innovation, SBI.
Clear-Chain is currently being tested by member banks. In addition to Clear-Chain, the consortium is also exploring blockchain applicability in other areas including syndication of loans, trade finance, asset registry & asset re-hypothecation, secure documents, cross-border payments, peer-to-peer payments, and blockchain Security Controls.
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Other banks that have shown an interest in collaborating with Bank-Chain are — Axis Bank, Central Bank of India, Deutsche Bank, HDFC Bank, IDBI, Kotak Mahindra Bank and Saraswat Bank. Banks can greatly benefit from using blockchain technologies, as they can be used to remove a huge amount of paperwork and intermediaries.
A report from Santander InnoVentures claims:
Banks can slash infrastructure costs by $15-20 billion by 2022, by eliminating redundant activities.
Core benefits of Blockchain
Some of the core benefits of blockchain technology for the banking sector include better client satisfaction through faster, more convenient and secure services, minimization of fraud, maximization of efficiency, security and transparency, streamlining paper work, accelerated information and money flows, greatly improved auditability, streamlining paperwork and greatly improve auditability.
Since blockchain or distributed-ledger-system operates like a secure shared Google spreadsheet where all transactions are visible to anybody on the platform—that is what makes it so unique in terms of information-sharing. As bankchain gets bigger, even critical details of other business transactions for banks to keep tabs on will become available.
RBI needs to step up and take over that function, since the results will be beneficial to the banking system as a whole.As in all bank transactions, confidentiality will be critical, banks have such information available with them protected by law.