The action around banks adopting blockchains in India is heating up. Private sector lender Axis Bank has partnered with financial technology company Ripple to make cross border remittances using blockchain. Ripple is a financial settlements solution which cuts costs and time in making a cross border remittances.
Axis Bank says that Ripple’s technology can reduce the the time for international money transfer to 5-10 seconds from the existing 3-5 days. Note that Ripple will allow cross border transactions with only partner banks through the block chain. In addition to Axis Bank, Ripple counts Standard Chartered Bank, Bank of America Merril Lynch, UBS Group, Mizuho etc as clients.
A blockchain , the underlying technology in bitcoins and other cryptocurrencies, is a shared digital ledger which is continuously updated with all transactions. This ledger keeps a record of each transaction that occurs across a fully distributed or peer-to-peer network, either public or private.
Though blockchains have an enormous applications in cutting down financial intermediaries for international money transfers, they will also find huge applications in deploying smart contracts, a set protocols that facilitate, verify, or enforce the negotiation of a contract. Smart contracts usually have a user interface which can emulate the logic of a contractual clause.
YES Bank, for example, is using a smart contract developed by fintech start up Cateina Technologies on a blockchain which will allow Bajaj Electricals to process disbursement of of funds and discounting to its vendors. It added that it has put in place a detailed roadmap on commercialising blockchain-based banking solutions in India and is exploring use cases for implementation towards ‘Letter of Credit’ and Documentary Collections, Foreign Remittances and Partnering with Correspondent Banks for Trade Finance among others.
In October last year, ICICI Bank created a blockchain application and piloted transactions on its block chain network in partnership with Emirates NBD, a banking group in the Middle East. In ICICI Bank, the first transaction on the blockchain was executed to showcase confirmation of import of shredded steel melting scrap by a Mumbai-based export-import firm from a Dubai-based supplier.