Hyperledger Project, R3CEV, Ripple, Ethereum – all have banks involved and many of them and possibly the same one’s. Blockchain is a technology concept, the journey from lab to practice can be long and arduous especially if the banking processes are being layered on technology teams; but there is sincere hope that the technologists are leading and not being led. Is there a risk of all this becoming a Bureaucratic-chain?
In my first blog Blockchain-The-Real-Brain-Buster I raised some questions. As banks are most active in this space along-with the startups, in this blog I will (try to) solution-ise the different view points. This should give the reader an idea of how technology and startups can evolve in the space. There is a sense from a certain segment that this may all just be hype before hysteria kicks-in. Perhaps a moment to put some logic behind the hype. A brief viewpoint – how can Blockchain help in consumer banking?
Bricks and mortar to digital, the information flow and the cryptography is changing the way we do things. Touch of a finger-phone unlocks-apps open-identification verified-transaction settled. Biometric information from the phone, the critical information such as date of birth, post-code, address and a couple of additional parameters to create a unique cryptographic key that identifies an individual in the digital world and you are integrated in the famous distributed ledger. Blockchain Step One.
If (and this is a big if) we go down the route of each individual’s assets and liabilities consolidated in the layers determining not just the net-worth but also the behavioural side and the habits we are looking at a consolidation exercise. Now, imagine this, you own a house, some stocks, a bit of cash, an automobile or two, some jewellery all of this stacked up against your cryptographic identification, you get the picture. A node in the distributed ledger. Blockchain Step Two.
Grocery shopping, filling petrol in your car, paying for your transportation we are pretty much all contactless already. All thats left to do is have terminals in shops where biometrics are detected, cash is debited from the node in the ledger a block diminishes from your stack (you get physical goods in return!) but the block becomes part of a chain in a corporate’s infrastructure. Investments and trading. Buying or selling shares, units in a fund is all part of having the information from different nodes and exchange thereof. Blockchain Step Three.
The ambitious will start thinking of integrating robo-advisers to this with automated investment strategies, instant cash sweep solutions enabling yields and even investing in real-estate syndicates. So where is the problem? The models have not yet been tested (atleast not publicly). There are no regulations or standards. The rising interest rate scenarios will certainly create riddles. For institutions the bureaucracy or protectiveness comes into play when the levels of interaction outside the respective businesses need to be managed. Fintech can deliver a solution that may work but will this come from the labs in the banks or startups or the big consortiums – remains to be seen.
Regulation, cryptography, data collation, KYC metrics, transaction management (how will the money move) – it is all about creating standards and solving for these. The challenge is managing ecosystems. From consumer banking to institutional banking, from payments management to exchange of assets. Value to volume the translation is coming. Is this all too simplistic? Even the pessimist in me can imagine a few variations of an implemented model, I hope the skeptics will not kid us.
Blockchain is a powerful concept. The different banks, ecosystems, processes are a Bureaucratic-chain about to break-up. There is light at the end of the tunnel.
Featured image: https://stocksnap.io