FinTech Summit 2017: Blockchain for Business

 FinTech Summit 2017: Blockchain for Business

The Indian School of Business in partnership with the National Stock Exchange (NSE)  of India organised its first FinTech Summit on July 21, 2017 in Mumbai. "Blockchain for Business" was the theme of the event, which had 43 participants in attendance. The summit came on the back of the launch of the Digital Identity Research Initiative (DIRI) — a pioneering multi-disciplinary research initiative on Aadhaar in partnership with the Omidyar Network. The summit attracted wide participation from various domains — Nomura, Bank of Baroda, SBI, Invesco & Yes Bank from the banking, financial services and insurance (BFSI) sector;  consulting firms KPMG, Deloitte & EY;  a host of start-ups, and companies such as the Reliance Group and Pidilte from the manufacturing space. The summit also saw active participation from such sectors as fast moving consumer goods (FMCG), credit bureaus, National Payments Corporation of India (NPCI), Information and Technology (IT) and shipping & logistics. The participants found the sessions very insightful and stated that they gained a better understanding of blockchain as a revolutionary way of using a consensus mechanism as a basis for ensuring trust, accountability and transparency across the network. Many participants expressed their appreciation of Professor Bhagwan Choudhary's overview of blockchain in a business setting.

In his message, “Learn from the future”, ISB Dean Professor Rajendra Srivastava shared valuable insights for businesses looking to adopt blockchain technology. Drawing a parallel with Henry Ford's assembly line innovation, which reduced the time required to make a car from 12 hours to 93 minutes, the Dean spoke about how disintermediation reduced transaction time. He pointed out that technology needed to be solution focused, and that businesses should test a few impactful use cases before they scale up. He offered this thought-provoking piece of advice: “Start-ups within established companies should be outside the core businesses, because the ‘tyranny of the core’ will lead to a pushback”. He concluded by reinforcing that investors, when evaluating these businesses, should look at their potential and hockey stick growth, rather than subject them to accounting parameters.

Dr. Bhagwan Chowdhary, Professor of Finance at UCLA and co-founder of Financial Access at Birth, got down to brass tacks, explaining the technology block by block.  He explained the concept of SHA 256, which is essentially that a message of any length can be converted into a string that is only 256 characters long — in the binary world 2^256. Going back in time, Professor Chowdhary traced the evolution of this technology to the 80s when cryptography was used to send messages securely through encryption and decryption. However, adoption of the technology really took off with the advent of the Internet. But it was distrust of the financial system that led the world to pay attention to Satoshi Nakamoto’s paper on blockchain in 2008. The key message was disintermediation.  Professor Chowdhary explained that even without any central clearing authority, transfers are more secure because the public key is announced to everybody. So, everyone knows the public key but only the people interacting in that transaction have the private key. Because everyone in the chain has that information, even if someone tries to hack the system, he will have to hack all the nodes, and the cost of such a move will outweigh the benefits. Hence, it is one of the most secure modes of trade available today.
Professor David Lee extended the argument by saying that blockchain would lead the 4th industrial revolution. An investor in many blockchain companies, Professor Lee listed the 5Ds essential for the new economy — digitisation, disintermediation, democratisation, decentralisation and disappearance. He named operational simplification, regulatory efficiency improvement, counterparty risk reduction, clearing and settlement time reduction, liquidity and capital improvement, and fraud minimisation as the major benefits of blockchain. Lending a global perspective to his talk, he discussed Project Ubin in Singapore, which  has been highly successful in exploring the use of distributed ledger technology (DLT) for clearing and settlement of payments and securities.  He also discussed practical use cases such as OmiseGo, an ethereum-based financial technology company offering a decentralised exchange, and TeNX, a technology that connects blockchain assets for everyday use. 

Professor Lee highlighted that India, while focusing on financial inclusion, is missing a similar focus on blockchain, which is probably the single most powerful tool for financial inclusion because of its applications in KYC and transfers.

Resident experts Padmanabhan Balasubramaniam and Reema Gupta brought the conference to a close after Stellar, a global open source software company, showed how it reduced costs in the US$67 billion remittances market in India to almost zero, and the Auxesis group described its partnership with the Rajasthan government to manage digital identity and transfer of subsidies using blockchain.