Five Challenges Blockchain Companies Face While Working With Banks
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We have read and heard enough about the blockchain and its potential use cases in various industries, especially the financial sector. But considering the size and the legacy of the traditional financial companies, adopting of the blockchain isn’t going to be a cakewalk.
In a conversation with Entrepreneur, local and international blockchain startups discuss the hurdles they face while working with banks.
According to Vajahaath Hussain, CEO, Almora.io the biggest challenge that exists is adoption.
He says, “Adoption of any new technology necessitates a need for time-consuming approvals and complicated processes. Considering the disruptive nature of blockchain technology, we should not delay its adoption and start reaping the numerous benefits it has.”
Considering banking is a legacy system, the technology used is legacy and obsolete, Santhosh Palavesh, Chief Innovations Officer, Belfrics Global often find banks resisting changing.
He adds, “Most of the banking solutions have integration issues with latest technologies like blockchain. Because of which some development efforts is also required on the bank's end to migrate to the blockchain. But smart banks, see this as an opportunity to build themselves an edge over others and aggressive migrate to Blockchain. These hurdles can be sorted by having a clear digital transformation roadmap to migrate to the blockchain.”
Scarcity of talent
Additionally, Chinmaya Sharma, Co-founder, Blockchain Semantics and Zeonlab also feels there is a huge paucity of talent at companies to even vanguard and champion projects being done by technology partners.
He asserts, “Banks, given the sensitive nature of core operations, cannot permanently rely on tech partners. Creating in-house teams that understand the technology and can build modules on it will be important. We are doing our bit here by training employees, running workshops under the mantle of BlockchainSemantics.”
For Chris Vincent, Project Manager at Elemential one of the key challenges of working with the BFSI sector is the significant amount of regulatory process that exists in some form or the other.
But the case regulatory issues pose hurdles for widespread adoption of Blockchain globally, not just in India as currently, there is no legal framework to regulate the application of blockchain.
Discussion what works for Elemential, he shares, “We try to work with these processes instead of trying to pass through them. The key is to ensure that you provide value to the stakeholders that are the best way to get through all the challenges.”
While on the other side, Sharma expects the Government of India to take cognizance of this and come out with draft policies soon.
“The job is easier said than done though. There are several complex questions to answer before any one country is able to create a backbone based on blockchain that can take the burden of any aspect of banking completely. Remember, banking in any country is a system that has to take decades if not hundreds of years to look the way it does,” he adds
Different blockchain models being custom-developed by different companies or consortia will soon be another hurdle to the creation of an inclusive blockchain ecosystem.
Sharma from Zenolabs says without a standardised approach to the blockchain, the technology may not scale and may not be able to bring different parties on to the same platform and therefore, interoperability is going to be key.
“Hence, individual distributed ledger networks, banks and NBFCs will have to collaborate intensely either via standardised protocols or by using the same blockchain systems or via a joint governance body that creates common standards,” he shared.