Mini Project – 2

Report On
“Blockchain Technology in Banking Industry.”
Submitted for the partial fulfillment of the Award Of
Master of Business Administration
DEGREE
(Session : 2021- 2022)

SUBMITTED BY
GOVIND KUMAR MANDAL
2102720700054

UNDER THE GUIDANCE OF

PROF: DR NIYATI SHUKLA

GREATER NOIDA INSTITUTE OF TECHNOLOGY

(MBA Institute)

AFFILIATED
 TO
DR. A.P.J. ABDUL KALAM TECHNICAL UNIVERSITY
(FORMERLY UTTAR PRADESH TECHNICAL
UNIVERSITY), LUCKNOW

Student Declaration

I GOVIND KUMAR MANDAL hereby declare that the work which is being
presented in this report entitled “Blockchain Technology in Banking Industry” is
an authentic record of my own work carried out underthe supervision of Prof.
DR.NIYATI SHUKLA.

The matter embodied in this report has not been submitted by me for the
award of any other degree/ Diploma/ Certificate.

GOVIND KUMAR MANDAL

Date:

GREATER NOIDA INSTITUTE OF TECHNOLOGY (MBA Institute )

i

Director Certificate

This is to certify that the work which is being presented in this report entitled
“Blockchain Technology in Banking Industry” is an authentic record of the
GOVIND KUMAR MANDAL (2102720700054) carried out under my
supervision. The statements made by the candidate are correct to the best of my
knowledge.

Prof. (Dr.) Rudresh Pandey : Director

Name of Supervison : Prof. NIYATI SHUKLA
GREATER NOIDA INSTITUTE OF TECHNOLOGY
(MBA Institute)
Date:

(Seal of the Department/ College)

 ii

Acknowledgment

I would like to express my special thanks of gratitude to my mentor Prof.

DR.NIYATI SHUKLA as well as our director sir Prof. (Dr.) Rudresh Pandey
who gave me the golden opportunity to do this wonderful project on the topic
“Blockchain Technology in Banking Industry” ,which also helped me in doing a lot
of research and i came to know about so many new things I am really thankful to
them.

Secondly I would also like to thank my parents , seniors and friends who
helped me a lot in finalizing this project within the limited time frame.

DATE:
PLACE:GNIOT,Greater Noida
GOVIND KUMAR MANDAL
2102720700054

iii
 Content Page

Topics Page No.

1. Industry choice and its overview

2. Market size of the blockchain technology

3. Business Models used in blockchain

4. Major alternatives to blockchain

5. Impact of Blockchain technology and its application

6. Conclusion

7. Bibliography
iv
❖ Industry choice and its overview
Blockchain technology is an open, distributed ledger that records records transactions between two
parties. A blockchain is made up of individual data blocks that include a sequence of connected
transactions that are linked in a certain order. Without the need for a centralized authority or middlemen,
all of the parties involved can share a digital ledger across a computer network. As a result, transactions
on the blockchain are processed more quickly.

Blockchain technology is a core, underlying technology with promising application prospects in the
banking industry. On one hand, the banking industry in China is facing the impact of interest rate
liberalization and profit decline caused by the narrowing interest-rate spread. On the other hand, it is also
affected by economic transformation, Internet development, and financial innovations. Hence, the
banking industry requires urgent transformation and is seeking new growth avenues. As such,
blockchains could revolutionize the underlying technology of the payment clearing and credit
information systems in banks, thus upgrading and transforming them.

Blockchain applications also promote the formation of “multi-center, weakly intermediated” scenarios,
which will enhance the efficiency of the banking industry. However, despite the permissionless and self
governing nature of blockchains, the regulation and actual implementation of a decentralized system are
problems that remain to be resolved. Therefore, we propose the urgent establishment of a “regulatory
sandbox” and the development of industry standards. Blockchain can become the core, underlying
technology of the financial sector in the future. Presently, even BAT has already begun to implement
blockchain.

Hence, given its considerable lag behind the current FinTech 1.0, the banking industry should utilize the
advantages of its resources and size, in order to actively conduct research and testing of blockchain
applications. This will enable them to become the pioneers of technological applications that can lead
and participate in the formation of new business landscapes, hence, continuously improving the capacity
and content of high-value financial services and fostering new momentum for growth in the industry.
Blockchain can establish a credit mechanism in a situation where there is a lack of mutual trust among
parties, thereby resolving the high costs caused by the non-technical aspects of centralization. The
processes of financial services are fraught with problems, such as efficiency bottlenecks, transaction lag,
fraud, and operation risks. It is believed that the majority of these problems can be resolved as a result of
applying blockchain technology.

❖ Market size of the industry in India

The global blockchain market size is projected to reach USD 104.19 Billion by 2028,
exhibiting at a CAGR of 55.8% in the forecast period. In its report titled “Blockchain
Market Analysis Research Report, 2021-2028” Fortune Business Insights mentions that
the market size stood at USD 3.06 billion in 2020.

In recent times, demand for cloud-based services has increased dramatically. Moreover,
the pandemic acted as a catalyst in creating even more new opportunities for this
technology. Technology is demanded in setting up virtual work platforms, and this has
created a demand for software as a service in companies to ensure work continuity.

Additionally, B-a-a-S has also emerged as an ideal solution to cater to demand for small
and medium sized enterprises (SMEs). SME's are using this service to safeguard their
digital entities and authenticate human identities, increasing demand for B-a-a-S
products. The aforementioned factors are expected to fuel the market growth during the
forecast period.

In recent years, there has been a boom in the financial markets, increased product
varieties, and continuous financial innovations. The focus of capital markets range from
derivatives to asset securitization, and then to P2P, crowdfunding, and others.

Report Scope & Segmentation

Financial innovations can offer capital market participants, especially small and mediumsized
enterprises (SMEs), more options, thus providing more convenient and personalized services. This
creates significant competition with the traditional banking industry. According to the Study, the
transaction sector would expand at the fastest CAGR of 14.6% between 2021 and 2030. Based on the
kind, Bitcoin is projected to acquire a substantial share over the projected timeframe since it is the
world’s most widely known digital currency and works without the requirement for permission from any
external source of authority.

Market Size in Aisa pacific (Projected)

According to statistics by the Central Depository & Clearing Co. Ltd., in 2015, the total asset
securitization products issued nationwide were worth RMB 603.24 billion, equivalent to a growth of
84%; their market stock was RMB 770.395, equivalent to a growth of 129%.6 In 2016, the asset
securitization market will progress toward the scale of trillion RMBs.

The crowdfunding industry has also achieved excellent results. According to incomplete statistics, as of
the end of 2015, there were 283 normally operating crowdfunding platforms. For the entire 2015, the
national crowdfunding industry successfully raised RMB 11.424 billion. This was the first year in
history to exceed RMB 10 billion, registering an increase by 429.38% compared to 2014.
 ❖ Business Model/s
Blockchain business models are peer-to-peer networks based on decentralized transactions that
use crypto coins and tokens to make a profit and provide users with exchanging services or
goods.The decentralized structure of blockchain lies at the core of business operations, data
storage, profit collection, business growth. Blockchain is used to assure that end users have a
secure and transparent environment for data management, transactions, communication with
other users, etc.

It provides an insight into any data manipulation, highlighting and exposing potential cybercrime
attempts before they have a chance to materialize that makes blockchain a potentially strong
cybersecurity business model. Following are some blockchain business models:-

⮚ Blockchain as a Service (BaaS)

Blockchain as a Service is the creation of cloud-based software for companies that build
blockchain apps. Such software is available to users on a subscription basis - customers
pay a monthly fee and receive access to all updates, tech support, and additional
resources. The subscriptions can differ in their functionality - premium plans can include
improved features, team access, or direct tech support.

⮚ Utility Token Business Model

Tokenization is the process of using tokens to represent currencies, services, products,
and any kind of assets. Blockchain uses cryptographic tokens - a digital form of an asset
that is connected to a blockchain network - to allow users to receive goods and services
on a decentralized platform, as well as invest in the platform.
 Tokens that can be used on the blockchain platform is a utility token used to get access to
features or receive services from other users. Some tokens allow users to vote on certain
issues (for instance, if a user purchased a token of a sports club, they might get the right to
vote on management decisions), others reward users for their work for the community and
can be exchanged for Bitcoin, but not spent on the service.

⮚ Blockchain-based Software Products

Blockchain-based software products are represented by tools that use blockchain for some
features - secure data storage, documentation management, or analytics. Let’s see what
characteristics of blockchain are most useful for blockchain-based software and how it’s
applied in different industries.

❖Security benefits:
Decentralization in traditional business models, the data is stored on a single centralized server. It’s easy
to target a single server and put in jeopardy important data, like financial, medical, or governmental
records. For instance, software developers, who work in healthcare, often use blockchain to improve
safety - medical data is stored on all devices that are connected to the blockchain network, rather than
just on one.

❖Crypto transactions:
blockchain-based transactions allow making safe international payments with low commission or no
money. This feature of blockchain is attractive to fintech developers, who want to make secure
international transactions available to wide audiences. Many tools are based on providing
blockchain-based payments as well as exchanging cryptocurrencies for traditional ones.

❖ Smart contracts:
Ethereum-based contracts are the sets of algorithms that determine agreements’ conditions. As soon
as the requirements are met, the contract is executed automatically. This application of blockchain is
useful in fields like real estate or insurance, where the process of preparing the documentation is
slow and disorganized. Smart contracts help to define objective requirements for the deal and
deprive parties of the right to suddenly change their minds.

❖ Major competitors for blockchain technology in the industry

1. Centralized databases:
One of the biggest concerns about traditional blockchains has been scalability. While the blockchain
community may get excited about decentralizing the database, there is real value in managing one
highly optimized system of record in a centralized database.Newer blockchain implementations are
getting better, but their performance still pales in comparison to what is possible with a well
managed centralized database. For example, the Visa network (VisaNet) has a capacity of 65,000
transactions per second, whereas the Bitcoin network can only handle a few transactions per second.
VisaNet currently handles an average of 2,000 transactions per second, so there is plenty of room for
growth.

2. Centralized ledgers:
It promises the immutability and verifiability of blockchain combined with the ease and scalability
of a traditional cloud service. Amazon cautions, however, that a proper blockchain may be a better
option in cases that involve untrusted parties.
Centralized databases and ledgers aren't all upside, however. Both have points of failure that are
prone to cybersecurity hacks and data breaches, said Alex-Paul Manders, a director at ISG, a
technology research and advisory firm.

3. Distributed databases
Major database vendors such as Oracle and Microsoft have offered distributed databases for
years that use some combination of data replication and duplication to ensure data consistency
and integrity. This allows companies to develop decentralized applications that run when
disconnected from the internet and then sync up with other database nodes when connected.
It can also allow data sharing in a way that enforces privacy and provides transparency into how
data is being used. OrbitDB sits on top of a distributed filesystem that allows operation even
if one node goes down -- another blockchain-like feature.
4. Cloud storage
Blockchain is sometimes promoted as a way to store data in a decentralized manner. But
blockchain storage comes at a high cost. One analysis estimated it would cost about $13,820 to
store one megabyte of data on the Ethereum network, in contrast to a few cents on Amazon
Simple Storage Service (S3). The trust and security policies and governance layers of cloud
 services are sufficient for most enterprise applications. In addition, several third-party data
storage services can provide better governance and security with far less overhead than a
blockchain would entail.
5. Decentralized storage

IPFS has been emerging as a promising approach for storing data across a peer-to-peer network.
It is attracting a lot of interest from blockchain developers because of its ability to decentralize
storage that can be integrated into other applications.
It is not technically a blockchain. IPFS allows developers to store webpages, content and data in
ways that can reduce bandwidth requirements, improve resilience and mitigate the impact of
censorship. Storj is another promising distributed storage technology that allows developers to
encrypt files, split them into pieces and then distribute them across a global cloud network. It is
directly compatible with Amazon S3 storage tools, which should make it easy for cloud
developers to weave into applications without learning new tools.

Altervatives to blockchain Technology

❖ Impact of technology and its application in the industry

Blockchain technology is a type of underlying technology that can connect with a variety of scenarios. It
can achieve asset digitization and point-to-point value transfer, thereby reconstructing the financial
infrastructure. This sharply increases the process efficiency of the clearing and settlement of financial
assets after transactions, while reducing costs. Hence, it resolves several existing problems in the
banking industry to a large extent, blockchain can become the core, underlying technology of the
financial sector in the future. Presently, even BAT has already begun to implement blockchain. Hence,
given its considerable lag behind the current FinTech 1.0, the banking industry should utilize the
advantages of its resources and size, in order to actively conduct research and testing of blockchain
applications. This will enable them to become the pioneers of technological applications that can lead
and participate in the formation of new business landscapes, hence, continuously improving the capacity
and content of high-value financial services and fostering new momentum for growth in the industry.

❖ Applications

Payment clearing system:

Point-to-point payment can also be implemented using blockchain technology, thus eliminating the
intermediary link of third-party financial institutions, which will greatly improve service efficiency
and reduce the transaction costs of banks. This will also enable banks to satisfy the requirements for
rapid and convenient payment clearing services for cross-border commercial activities. McKinsey has
made an estimation which shows that the cost of each transaction in Cross-Border business can be
greatly reduced due to the application of blockchain.

Bank credit information systems

The ineffectiveness of bank credit information systems is mainly due to the following: first, the
scarcity and poor quality of data makes it difficult to judge the situation of personal credit; second are
difficulties in inter-institutional data sharing; third is the unclear ownership of user data, leading to
difficulties in circulation due to concerns for privacy and security. Although the solutions to these
problems will require the cooperation and participation of different stakeholders, blockchain
technology can provide some assistance in addressing these issues.

Establishing data ownership

Blockchain technology can perform data encryption, which can help us control our own big data and
establish ownership. This can further guarantee that the information is genuine and reliable, while
also reducing the costs of data collection by credit agencies. Using blockchain technology, big data
can become credit resources with clear personal ownership, and even establish the foundation of
future credit systems.

Promoting data sharing

Blockchain can facilitate the automatic recording of big data by credit agencies, while also storing
and sharing encrypted forms of the customer’s credit status within institutions. This enables sharing
credit data. The following blockchain credit solution has been proposed: during the “know your
customer” (KYC) process, banks should store customer information in their own database, and then
employ encryption technology to upload summary information for storage in the blockchain.
 ❖ Conclusion

Blockchains could revolutionize the underlying technology of the payment clearing and credit
information systems in banks, thus upgrading and transforming them. Blockchain applications also
promote the formation of “multi-center, weakly intermediated” scenarios, which will enhance the
efficiency of the banking industry.

It is worth noting that the problems of regulation, efficiency, and security have always sparked
extensive debate in the process of each new financial innovation. However, history is not stopped by
current obstacles, as the technical, regulatory, and other problems of blockchain technology will
ultimately be resolved.

Hence, the prospect of integrating blockchain technology into the banking industry will most likely
occur in the near future

❖ Bibliography
1: https://www.dqindia.com/top-5-uses-blockchain
banking/#:~:text=Blockchain%20has%20the%20potential%20to%20allow%20banks%20to%20settle
%2 0transactions,financial%20system%20was%20set%20up.
2: https://www.fortunesoftit.com/top-7-blockchain-use-cases-in-banking-and-finance/
3: https://www.globenewswire.com/news-release/2022/02/03/2378180/0/en/Blockchain-Market-Size
Growing-at-a-CAGR-of-55-8-to-Reach-USD-104-19-Billion-by-2028.html
4: https://www.ingeniumweb.com/blog/post/blockchain-business-models-a-comprehensive-guide/4925/
5: Report by McKinsey: Blockchain—Disrupting the Rules of the Banking Industry, 2016-05. 6: Report
by Guo and Liang Financial Innovation (2016).
THANK YOU