The Transformative Impact of Blockchain Technology on Banking and Financial

Services: Innovations, Challenges, and Future Prospects

A project submitted to

University of Mumbai for partial completion of the degree of Bachelor of Management Studies

Under the Faculty of Management

By Shivansh Agrawal

Under the Guidance of Dr Sharyn Bangera

Usha Pravin Gandhi College of Arts, Science & Commerce Bhaktivedanta Swami Marg, JVPD Scheme,
Vile Parle (West), Mumbai- 400056.

March 2025
 ACKNOWLEDGEMENT

I take this opportunity to thank Usha Pravin Gandhi College of Arts, Science & Commerce

and the University of Mumbai for giving me the chance to undertake this project.

I would like to thank our Principal, Dr. Anju Kapoor for providing the facilities necessary for the completion
of this project.

I take this opportunity to thank our Coordinator, Dr Sriram Deshpande for their moral support and guidance.

I would also like to express my sincere gratitude towards my project guide Dr Sharyn Bangera

whose guidance and care made the project successful.

I would also like to thank our college library for having provided various reference books and magazines
related to my project.

Lastly, I would like to thank each and every person who directly or indirectly helped me in the completion of
the project especially my parents and peers who supported me throughout the project.
 DECLARATION

I the undersigned Mr. Shivansh Agrawal, a student of T.Y.B.M.S. Semester VI (2024-25) hereby declare that
the work embodied in this project work titled "The study of emerging sectors which can drive angel investors”
forms my own contribution to the research work carried out under the guidance of Dr Sharyn Bangera is a result
of my own research work and has not been previously submitted for any other Degree/Diploma to this or any
other University.

Wherever reference has been made to previous works of others, it has been clearly indicated as such and
included in the bibliography.

I, hereby further declare that all information of this document has been obtained and presented in accordance
with academic rules and ethical conduct.

Shivansh Agrawal

Name and Signature of the learner

Certified by

Dr Sharyn Bangera

Name and signature of the Guiding Teacher

 CERTIFICATE

This is to certify that Mr. Manan Borana has worked and duly completed his Project Work for the Bachelor
of Management Studies under the Faculty of Management in the subject of Finance and his project is entitled
"The study of emerging sectors which can drive angel investors” under my supervision.

I further certify that the entire work has been done by the learner under my guidance and that no part of it
has been submitted previously for any Degree or Diploma of any University.

It is his own work and facts reported by his personal findings and investigations.

Signature of Principal Signature of Co-ordinator

Dr. Sharyn Bangera

Signature of External Examiner Name and Signature of Guiding Teacher

Date of submission:
 Chapter 1

INTRODUCTION

1.1 INTRODUCTION

Blockchain technology has emerged as a transformative force in the banking and financial services sector,
revolutionizing operations in ways previously unimagined. It has transcended its status as a mere technological
buzzword to become a significant catalyst for change in transaction management, security, and transparency.
Envision a scenario where transactions are executed more swiftly, at lower costs, and with enhanced security—
this is the promise of blockchain. Its decentralized framework ensures that no single entity monopolizes
control, thereby mitigating fraud and fostering trust among all participants.

In this project, we will examine the profound impact of blockchain on the financial industry. We will
investigate how it is optimizing processes, reducing expenses, and extending financial services to individuals
who have historically been excluded from conventional banking systems. Through practical examples, we will
illustrate the application of blockchain in various domains, including cross-border payments, investment
management, and insurance. However, this exploration merely scratches the surface. The future of blockchain
is rife with potential innovations.

We will delve into emerging trends such as Central Bank Digital Currencies (CBDCs), which have the
potential to redefine our monetary interactions, and Decentralized Finance (DeFi), which provides financial
services without the need for traditional intermediaries. Additionally, we will examine the integration of
blockchain with artificial intelligence to develop more intelligent and tailored financial services, as well as the
tokenization of assets, which simplifies investment opportunities across diverse sectors, from real estate to art.

Nevertheless, it is important to acknowledge the challenges that accompany this technology, including
regulatory complexities, security vulnerabilities, scalability concerns, and the critical issue of public
perception and trust. This project aspires to provide a thorough analysis of both the prospects and challenges
that blockchain technology presents.

1.1.1 BLOCKCHAIN TECHNOLOGY

Blockchain technology is an advanced database mechanism that allows transparent information sharing within
a business network. A blockchain database stores data in blocks that are linked together in a chain. The data
is chronologically consistent because you cannot delete or modify the chain without consensus from the
network. As a result, you can use blockchain technology to create an unalterable or immutable ledger for
tracking orders, payments, accounts, and other transactions. The system has built-in mechanisms that prevent
unauthorized transaction entries and create consistency in the shared view of these transactions.

1.1.2 IMPORTANCE OF BLOCKCHAIN

Traditional database technologies present several challenges for recording financial transactions. For instance,
consider the sale of a property. Once the money is exchanged, ownership of the property is transferred to the
buyer. Individually, both the buyer and the seller can record the monetary transactions, but neither source can
be trusted. The seller can easily claim they have not received the money even though they have, and the buyer
can equally argue that they have paid the money even if they haven’t. To avoid potential legal issues, a trusted
third party has to supervise and validate transactions. The presence of this central authority not only
complicates the transaction but also creates a single point of vulnerability. If the central database was
compromised, both parties could suffer. Blockchain mitigates such issues by creating a decentralized, tamper-
proof system to record transactions. In the property transaction scenario, blockchain creates one ledger each
for the buyer and the seller. All transactions must be approved by both parties and are automatically updated
in both of their ledgers in real time. Any corruption in historical transactions will corrupt the entire ledger.
These properties of blockchain technology have led to its use in various sectors, including the creation of
digital currency like Bitcoin.

1.2 HOW DO DIFFERENT INDUSTRIES USE BLOCKCHAIN?

Blockchain is an emerging technology that is being adopted in innovative manner by various industries. We
describe some use cases in different industries in the following subsections:

Energy

Energy companies use blockchain technology to create peer-to-peer energy trading platforms and streamline
access to renewable energy. For example, consider these uses:

 Blockchain-based energy companies have created a trading platform for the sale of electricity between
individuals. Homeowners with solar panels use this platform to sell their excess solar energy to
neighbors. The process is largely automated: smart meters create transactions, and blockchain records
them.

 With blockchain-based crowd funding initiatives, users can sponsor and own solar panels in
communities that lack energy access. Sponsors might also receive rent for these communities once the
solar panels are constructed.

Finance
Traditional financial systems, like banks and stock exchanges, use blockchain services to manage online
payments, accounts, and market trading. For example, Singapore Exchange Limited, an investment holding
company that provides financial trading services throughout Asia, uses blockchain technology to build a more
efficient interbank payment account. By adopting blockchain, they solved several challenges, including batch
processing and manual reconciliation of several thousand financial transactions.

Media and entertainment

Companies in media and entertainment use blockchain systems to manage copyright data. Copyright
verification is critical for the fair compensation of artists. It takes multiple transactions to record the sale or
transfer of copyright content. Sony Music Entertainment Japan uses blockchain services to make digital rights
management more efficient. They have successfully used blockchain strategy to improve productivity and
reduce costs in copyright processing.

Retail

Retail companies use blockchain to track the movement of goods between suppliers and buyers. For example,
Amazon retail has filed a patent for a distributed ledger technology system that will use blockchain technology
to verify that all goods sold on the platform are authentic. Amazon sellers can map their global supply chains
by allowing participants such as manufacturers, couriers, distributors, end users, and secondary users to add
events to the ledger after registering with a certificate authority.

1.3 FEATURES & KEY COMPONENTS OF BLOCKCHAIN TECHNOLOGY

Blockchain technology has the following main features:

Decentralization

Decentralization in blockchain refers to transferring control and decision making from a centralized entity
(individual, organization, or group) to a distributed network. Decentralized blockchain networks use
transparency to reduce the need for trust among participants. These networks also deter participants from
exerting authority or control over one another in ways that degrade the functionality of the network.

Immutability

Immutability means something cannot be changed or altered. No participant can tamper with a transaction
once someone has recorded it to the shared ledger. If a transaction record includes an error, you must add a
new transaction to reverse the mistake, and both transactions are visible to the network.

Consensus
A blockchain system establishes rules about participant consent for recording transactions. You can record
new transactions only when the majority of participants in the network give their consent.

Blockchain architecture has the following main components:

A distributed ledger

A distributed ledger is the shared database in the blockchain network that stores the transactions, such as a
shared file that everyone in the team can edit. In most shared text editors, anyone with editing rights can delete
the entire file. However, distributed ledger technologies have strict rules about who can edit and how to edit.
You cannot delete entries once they have been recorded.

Smart contracts

Companies use smart contracts to self-manage business contracts without the need for an assisting third party.
They are programs stored on the blockchain system that run automatically when predetermined conditions are
met. They run if-then checks so that transactions can be completed confidently. For example, a logistics
company can have a smart contract that automatically makes payment once goods have arrived at the port.

Public key cryptography

Public key cryptography is a security feature to uniquely identify participants in the blockchain network. This
mechanism generates two sets of keys for network members. One key is a public key that is common to
everyone in the network. The other is a private key that is unique to every member. The private and public
keys work together to unlock the data in the ledger. For example, John and Jill are two members of the
network. John records a transaction that is encrypted with his private key. Jill can decrypt it with her public
key. This way, Jill is confident that John made the transaction. Jill's public key wouldn't have worked if John's
private key had been tampered with.

1.4 How does blockchain work?

While underlying blockchain mechanisms are complex, we give a brief overview in the following steps.
Blockchain software can automate most of these steps:

Step 1 – Record the transaction

A blockchain transaction shows the movement of physical or digital assets from one party to another in the
blockchain network. It is recorded as a data block and can include details like these:

 Who was involved in the transaction?

 What happened during the transaction?

 When did the transaction occur?

  Where did the transaction occur?

 Why did the transaction occur?

 How much of the asset was exchanged?

 How many pre-conditions were met during the transaction?

Step 2 – Gain consensus

Most participants on the distributed blockchain network must agree that the recorded transaction is valid.
Depending on the type of network, rules of agreement can vary but are typically established at the start of the
network.

Step 3 – Link the blocks

Once the participants have reached a consensus, transactions on the blockchain are written into blocks
equivalent to the pages of a ledger book. Along with the transactions, a cryptographic hash is also appended
to the new block. The hash acts as a chain that links the blocks together. If the contents of the block are
intentionally or unintentionally modified, the hash value changes, providing a way to detect data
tampering. Thus, the blocks and chains link securely, and you cannot edit them. Each additional block
strengthens the verification of the previous block and therefore the entire blockchain. This is like stacking
wooden blocks to make a tower. You can only stack blocks on top, and if you remove a block from the middle
of the tower, the whole tower breaks.

Step 4 – Share the ledger

The system distributes the latest copy of the central ledger to all participants.

1.5 Types of Blockchain Networks

1. Public Blockchains Think of public blockchains as the Wild West of the blockchain world—open,
free, and accessible to anyone. These networks are decentralized and allow anyone to join, participate,
and contribute. Bitcoin and Ethereum are the most well-known examples. They operate on a consensus
mechanism where everyone on the network has a say in validating transactions, which ensures
transparency and security. However, because they're open to everyone, they can sometimes be slower
and more resource-intensive.

2. Private Blockchains Private blockchains are the VIP sections of the blockchain world. Unlike public
blockchains, they're restricted and only accessible to a select group of participants. These networks are
often used by businesses and organizations that need to keep their data private but still want the benefits
of blockchain technology. Transactions are faster and more efficient since only a limited number of
 participants are involved. However, they lack the decentralization and transparency of public
blockchains.

3. Consortium Blockchains Consortium blockchains are like a members-only club where only pre-
approved participants can join. They are semi-decentralized and managed by a group of organizations,
rather than a single entity. This type of blockchain is ideal for industries where multiple organizations
need to collaborate and share information securely, such as banking, supply chain management, and
healthcare. Consortium blockchains offer more control and faster transactions compared to public
blockchains, while still maintaining a level of decentralization.

4. Hybrid Blockchains Hybrid blockchains are the best of both worlds, combining features of both public
and private blockchains. They offer the flexibility to keep certain data private while making other data
public. This type of blockchain allows organizations to have control over who can access specific
information, while still benefiting from the transparency and security of a public blockchain. Hybrid
blockchains are often used in scenarios where sensitive information needs to be protected, but some
level of public interaction is still required.

APPLICATIONS OF BLOCKCHAIN TECHNOLOGY IN BANKING & FINANCE

Blockchain, mostly known as the backbone technology behind Bitcoin, is one of the emerging technologies
currently in the market attracting lot of attentions from enterprises, start-ups and media. Blockchain has the
potential to transform multiple industries and make processes more democratic, secure, transparent, and
efficient. With high volumes of data getting generated every day owing to digitization of records, it becomes
important for every organization to effectively manage the security threats and achieve significant cost
efficiencies. This is where Blockchain, with its promises of decentralized ownership, immutability and
cryptographic security of data, is catching the attention of the C-suite executives. Multiple use cases are also
getting explored across industries as everyone has started realising the disruptive potential of this technology.
Financial players are the first movers to capitalize on this technology even though it is still in a nascent stage.
A study by the World Economic Forum predicts banks and regulators around the world are poised to
experiment multiple Blockchain prototypes in 2017. With 90+ central banks engaged in Blockchain discussion
globally, 2500+ patents filed over the last three years and 80% of the banks predicted to initiate Blockchain
and distributed ledger technology (DLT) projects by 2017, the Blockchain technology is on its course to
become the new normal in the world of financial services. Many companies, from a plethora of nonfinancial
services industries like telecom Cyber Security, Supply Chain Management, Forecasting, Insurance Industry,
Private transport and Ride Sharing, Cloud Storage, Crowd Funding, Voting, Governance, Energy
Management, Retail, Real estate are on its way to establish the potential Blockchain use cases to positively
disrupt their traditional business models or already implemented their pilot Blockchain use cases.
1.6 WHAT IS BLOCKCHAIN

A Blockchain is a digital, immutable, distributed ledger that chronologically records transactions in near real
time. The prerequisite for each subsequent transaction to be added to the ledger is the respective consensus of
the network participants (called nodes), thereby creating a continuous mechanism of control regarding
manipulation, errors, and data quality. It creates a digital ledger of transactions and thereby allowing to share
it among a distributed network of computers and it also maintains a continuously-growing list of records called
generally called "blocks" which are secured from tampering and revision. A blockchain implementation
comprises of two kinds of records: blocks and transactions. In each block contains a timestamp and a link to a
previous block is provided by the secure hash algorithm. The prime advantage is that it uses cryptography
which allows different users to modify the transactions on a secured network each one accessing their node of
data. If majority of nodes agree that the transaction performed looks valid, identifying information which
matches the blockchain's history and thus a new block is added to the chain. Blockchain configurations are
divided depending on the type and size of the network and then majorly by the use case of a particular
company. The two types of blockchain are public and private. Ledgers are public if: 1. Anyone can write data,
without permission granted by another authority. 2. Anyone can read data, without permission granted by
another authority For example, bitcoin is designed as a ‘anyone-can-write' blockchain, where participants can
add to the ledger without needing approval, there is no superior authority to decide, and it imbues a defence
mechanisms against attacks. As a result there is an increased cost and complexity in implementing this
blockchain. In Private Blockchain network the participants are known and trusted and there is a level of
confidentiality. For example, in a conglomerate, many of the mechanisms aren't needed or they are replaced
with legal binding contracts making everyone whoever has signed the contract to abide to these rules. It rapidly
changes the technical decisions used to build the solution.

Need for Blockchain

The major question that arises is to why use blockchain when already the market has flourishing plethora of
other databases. What substantial importance it holds against the competing products. For this let's understand
the problem with the existing systems.
They could be summed up as follows:

(i) Difficult to monitor and evaluate asset ownership and its transfer in a trusted business network.
(ii) Inefficient, expensive, vulnerable: All these factors extremely hinder the performance and thereby
destroying the progress

Solution offered by Blockchain

Blockchain unlike traditional systems is dynamic enough to become a leader in implementation in a mercurial
market scenario. In a blockchain the supreme advantage it ensures is that each party has a record which is
maintained in a ledger available to each one. It is a ledger widely passed between different users thereby
creating a shared database which is replicated to these users and who can access it only after they have the
access right for it. Consensus, provenance, immutability, finality are the various aspects into which it works,
making sure that all these facets work together into a reasonable amalgamation.

Anatomy of the Blockchain architecture

The blockchain architecture consists of a few fundamental concepts like decentralization, digital signature,
mining and data integrity.

(i) Decentralization: Rather than one central authority overpowering others in the ecosystem,
blockchain explicitly distributes control amongst all peers in the transaction chain.
(ii) Digital signature: Blockchain enables an exchange of transactional value using public keys by the
mechanism of a unique digital sign i.e. code for decryption known to everyone on the network and
private keys known only to the owner to create ownership
(iii) Mining: In a distributed system every user mines and digs deep into the data which is then
evaluated according to the cryptographic rules and it also acknowledges miners for confirmation
and verification of the transactions.
(iv) Data integrity: Complex algorithms and agreement among users ensures that transaction data, once
agreed upon, cannot be tampered with and thus remains unaffected. Data stored on blockchain acts
as a single version of truth for all parties involved hence reducing the risk offraud.

1.7 HOW BLOCKCHAIN WORKS

As described above the block chain is nothing but a distributed shared decentralized public ledger which is
open to all. It is a data structure which is perceived to be robust and immutable. The essence of the blockchain
as showcased in its most famous implementation to date is that the data is replicated. Every participant in the
network has the same list of bitcoin transactions. In a blockchain we check if the ledger is verifiable by a
majority of the participants in the network. In the bitcoin network, this majority of participants is replaced by
important members designated as the Validators in the networks. These validator nodes checks and then pass
around the payments and the block data. This is because to maintain the essence of the blockchain philosophy,
the bitcoin system aim to decentralized, thus not giving control to one single authority.

The working of a blockchain be it public or private is as described below:

Let us consider 5 participants in our blockchain, A, B, C, D, E who are on a decentralized, distributed network.
This blockchain example will implement the blockchain technology in the bitcoin system.
(1) A wants to send 50 bitcoins to B.
(2) This transaction of 50 bitcoins is represented online as a block.
(3)This block is then broadcasted to each and every participant in the network [C, D and E]. (4)In this example,
C, D and E will serve as the validators in our network. This approve that the transaction is valid.
(5) This block containing the transaction them is added to the blockchain.
(6) The 50 bitcoins are transferred from A to B.
In Step 4, the validator, C, D and E execute cryptographic algorithms and conduct an evaluation and
verification of the history of the individual blockchain under consideration. If the evaluation proves that history
and the hash values are all valid, then the transaction is accepted. This is known as distributed consensus. If
C, D and E for some reason cannot validate the information in the blockchain, then the data is rejected and
entry for the block is denied and it is not added into the blockchain. Here, one must note that each block is like
a page in a book. Just like a page contain two main characteristics, name a header containing book
name/chapter name and page number, and the contents of the book which is the story, the block in the
blockchain contains the header which is the hash value of the previous block and the content which is the
bitcoin transaction itself. So the Block 2 contains the hash value of Block 1, Block 3 contains the hash value
of Block 2, Similarly Block N contains the hash value of Block N-1.The first block is called the genesis block
and it is different from the other blocks in the sense that it does not contain a hash value of another block and
hence, produces an unspendable subsidy. The new blocks are added and linked to the older blocks of the
blockchain. This chain is continuously updated so that every ledger remains the same. The presence of this
hash value is what makes the blockchain robust. If say Block 3 is to be modified, then the hash values in all
of its subsequent blocks (Block 4, Block 5….. Block N) is also modified, thus giving rise to a regenerated
blockchain. This decentralized, transparent mechanism makes the blockchain secure, robust and free from
damage. The validators and the generators add to the blockchain only if they verify that it is the latest block in
the longest valid change. Another point to be noted here is that in a blockchain, the length of the blockchain
is not the number of blocks but the combined difficulty of the blocks. A blockchain is said to be valid if
(1) All the blocks in the blockchain are valid.
(2) All the transaction contained in the blocks are valid.
(3) The blockchain starts with the genesis block.

1.8 BENEFITS FROM BLOCKCHAIN

Blockchain, as discussed in the above section by virtue of its design and architecture, offers some inherent
benefits which the industry has been looking for quite some time now. The distributed nature of Blockchain
brings in a lot of transparency in processing and thereby reduces the need for manual verification and
authorisation. The key features of the Blockchain include following: 5.1 Near real time: Blockchain enables
the near real-time settlement of recorded transactions, removing friction, and reducing risk. 5.2 No
intermediary: Blockchain technology is based on cryptographic proof instead of trust, allowing any two parties
to transact directly with each other without the need for a trusted third party. 5.3 Distributed ledger: The peer-
to-peer distributed network records a public history of transactions. The blockchain is distributed and highly
available. The blockchain does not typically preserve the identities of the parties or the transaction data, only
the proof of the transaction existence. 5.4 Irreversibility & Immutability: The blockchain contains a certain
and verifiable record of every single transaction ever made. This prevents past blocks from being altered and
in turn stops double spending, fraud, abuse, and manipulation of transactions. 5.5 Smart Contracts: Stored
procedures executed in a Blockchain to process pre-defined business steps and execute a commercially/legally
enforceable transaction without involvement of an intermediary.

BLOCKCHAIN FIT ASSESSMENT FRAMEWORK

Banks across the country have successfully initiated collaboration with specialized firms (Fintech) and/or
consulting firms to build proof-of-concepts and explore various potential use-cases. This implies the
seriousness of banks towards the Blockchain technology and its eagerness to understand how Blockchain can
address and resolve few pain points in the current state process.
Major issues that banks face today
The Indian banking industry today is faced with issues such as rising costs of operations, increasing
susceptibility to fraudulent attacks on centralized servers and challenges in ensuring transparency. All this,
primarily because most of the banking transactions – from opening customer accounts to making global
payments – may require intensive manual processing and documentation, involve costly intermediaries and is
time consuming as these transactions need to be validated by various participants at various point in time
causing the delay thereby resulting in almost lack of fraud proof real time solution.
What are banks looking for?
Banks are continuously exploring new ways to perform transactions quicker for an enhanced customer service,
while ensuring cost efficiency in its operations and assuring transparency to customers and regulators. For
this, Blockchain potentially provides a solution for banks as it inherently helps eliminate intermediaries,
maintain immutable log of transactions and also facilitates real-time execution of transactions. This could
potentially reduce the TAT for banking transaction, reducing costs of manual work, and leading to enhanced
customer service and satisfaction. Like any other industry, choosing the right ‘use case' is the key for Banks
to leverage full value of Blockchain.
The Blockchain Fit Assessment Framework
Based on the above discussion of what are the current pain points of Banking Industry and benefits of
blockchain, a Blockchain Assessment Framework is developed to evaluate whether a particular process or
usecase is the right fit for a Blockchain based solution. For a process or a use-case to classify as Blockchain-
fit, majority of the questions provided in the framework need to be answered in the affirmative. As we can see
from the framework, each of the evaluation factors uncovers a pain point in the current state process, which
could be resolved by a feature of the Blockchain solution. The resulting impact of implementing a full-fledged
Blockchain solution is summarized below:

Factor Assessment Framework Impact of Blockchain Fit

Intermediary High fees for intermediary? Latency due Blockchain's distributed ledger technology
to processing through intermediary? facilitates disintermediation, thereby
Does the intermediary exist due to lack reducing costs and lowering latency.
of trust?
Transparency Are multiple participants involved? Does
The hash/pointers of the records written on
increase in transparency into the the Blockchain are immutable and
transaction help the participants? irreversible, not allowing modifications
and eliminating risk of fraud.
Information Is the same information being stored in Blockchain's distributed ledger and
Storage multiple locations? Is data consistency an consensus mechanism allows data
issue? consistency across multiple participants.
Manual Does the process involve manual Blockchain maintains automated audit trail
Processing operations? Is the cost of Reconciliation of transactions, thereby reducing manual
high? processing for data validations and
reconciliations.
Trust Is there trust among participants? Do Smart contracts allow codification of
multiple participants have the right to business rules, validations and
modify transactions? Is there a risk of reconciliation, thereby reducing manual
fraudulent transactions? processing.
Documentation Is the documentation paper-based? Is Smart contracts allow business validations
there a large number of and automated reconciliation for straight
documents/reports required to be through processing.
generated?
Time Sensitivity Will the transactions benefit from being Blockchain enables the near real-time
real-time or synchronous? settlement of recorded transactions,
reducing risk, and improving an enhanced
customer experience.

USE-CASES OR PROCESSES WHERE BLOCKCHAIN CAN PLAY A KEY ROLE Presented below
are some specific use cases, where we believe that Blockchain can play a key role for helping Indian banks
and financial institutions realize significant benefits.

Consortium Banking Corporations undertake multiple large projects such as development of roads, train
systems, airports, factories, new business centres, etc., which requires large-scale financing. Procuring these
large funds necessitate the institutions to come together to form consortium and diversify the financial risk
among its members. Such participation in lending will enable a bank to limit the commitment in respect of any
one party. The leader bank or members by rotation could do the work of inspection and verification of
securities. Various regulatory prescriptions regarding conduct of consortium / multiple banking / syndicate
arrangements were withdrawn by Reserve Bank of India in October 1996 with a view to introducing flexibility
in the credit delivery system and to facilitate smooth flow of credit. However, Central Vigilance Commission,
Government of India, in the light of frauds involving consortium / multiple banking arrangements which have
taken place recently, has expressed concerns on the working of Consortium Lending and Multiple Banking
Arrangements in the banking system. The Commission has attributed the incidence of frauds mainly to the
lack of effective sharing of information about the credit history and the conduct of the account of the borrowers
among various banks. We have examined this landscape using our assessment framework and find a near-
perfect candidate for adoption of a Blockchain based solution.

Factor Assessment Framework Consortium Banking Fit

Intermediary High fees for intermediary? Yes – agents & intermediaries are
Latency due to processing appointed at high fees to manage and
through intermediary? Does the administer the process.
intermediary exist due to lack of
trust?

Transparency Are multiple participants Yes – consortium members seek

involved? Does increase in transparency in customer's rating, loan
transparency into the transaction administering, etc. while customers
help the participants? seek transparency in underwriting.

Information Is the same information being Yes – customer information has to be

Storage stored in multiple locations? Is gathered from multiple sources for
data consistency an issue? underwriting. Each member also stores
a copy of the customer details.

Manual Does the process involve Yes – the entire lifecycle is very paper-
Processing manual operations? Is the cost of intensive with customer details,
Reconciliation high? negotiated terms and conditions among
members, etc.

Trust Is there trust among Yes – multiple participants are involved

participants? Do multiple in the transactions including agents,
participants have the right to customers, consortium members, etc.
modify transactions? Is there a who may not be well known to each
risk of fraudulent transactions? other, causing a lack of trust.
Documentation Is the documentation paper- Yes – There are multiple
based? Is there a large documentations required at
number of consortium formation, as well as
documents/reports required payment with a lot of validations
to be generated? for bills, items of purchase, etc.
This is not due to regulatory
reporting requirement.
Time Will the transactions benefit Yes – the turnaround time can be
Sensitivity from being real-time or reduced and risk lowered if
synchronous? payment settlements become real-
time.

Current Pain Points How Blockchain Can Help

Time-consuming process: Selection of members Faster syndicate formation:

based on financial soundness and industry expertise, Automated selection criteria for
evaluation of borrower’s financial background and syndicate formation in programmable
then negotiation of terms and conditions is a tedious smart contracts.
and time-consuming process for the Lead Arranger.

Intermediary Fees: Agents and intermediaries have Technology integration: Automated

to be appointed at high fees to manage and due diligence and analysis of
administer the process. information for loan underwriting
through Blockchain, reducing TAT.

Manual Processing: The technology systems are Digitization of documents:

obsolete and processes are manual and paper- Agreements, contracts, terms, and
condition documents, etc. are
intensive, taking a long time as well as increasing the digitized on the Blockchain and
cost of operations. validations and checks are automated.

Duplication of effort: The lack of technology Document immutability:

integration for due diligence and underwriting Immutability feature of the
causes referencing of different applications and Blockchain eliminates the need for
sources during the process. Document duplication multiple copies of the same
also leads to the risk of fraud. documents being held.

Delayed settlement cycles: Delayed settlement Reduced settlement periods:

cycles for payments lock up capital and increase Blockchain can facilitate near real-
default risk. time loan funding and payment
settlements with activities executed
via smart contracts.
1.8 PAYMENTS

The Indian banking sector has been growing successfully, innovating and trying to adopt and implement
electronic payments to enhance the banking system. Though the Indian payment systems have always been
dominated by paper-based transactions, e-payments are not far behind. Ever since the introduction of
epayments in India, the banking sector has witnessed growth like never before. Looking at the nature of today’s
payment processing services, it makes it difficult to follow the movements of money. Even with current Know
Your Customer rules, it can be challenging to link the name on a bank account to an identifiable person or
company – though new “beneficial ownership” rules may make it easier in the U.S. In some countries, secrecy
rules prevents banks from revealing financial information about their customers to foreign regulators. We have
examined this landscape using our assessment framework and find a near-perfect candidate for adoption of a
Blockchain based solution.

Factor Assessment Framework Payments Fit

Intermediary High fees for intermediary? Latency Yes – intermediaries such as correspondents,
due to processing through counter-parties increases latency.
intermediary? Does the intermediary
exist due to lack of trust?

Transparency Are multiple participants involved? Yes – applicant, beneficiary, bank,

Does increase in transparency into the correspondents, etc. are involved in the
transaction help the participants? transaction. Higher transparency would
increase trust in the system, and speed up the
process.

Information Is the same information being stored in Yes – common information is stored across the
Storage multiple locations? Is data consistency participants such as banks, correspondents,
an issue? counter-parties.

Manual Does the process involve manual Yes – it is required throughout the lifecycle of
Processing operations? Is the cost of the process. Manual processing is performed
Reconciliation high? by the correspondents and banks.

Trust Is there trust among participants? Do Yes – multiple participants are involved in the
multiple participants have the right to transactions and make changes/issue
modify transactions? Is there a risk of instructions. Since these may be unknown to
fraudulent transactions? each other, there is a lack of trust and
possibility of fraudulent activities.

Documentation Is the documentation paper-based? Is No – Large number of documents are required

there a large number of to be generated.
documents/reports required to be
generated?

Time Sensitivity Will the transactions benefit from Yes – it will help in providing enhanced
being real-time or synchronous? customer experience, and reduce the exposure
risk of banks.
Current Pain Points How Blockchain Can Help

Manual documentation Automated documentation

Time-consuming process Real-time settlement of transactions

Lack of mechanism to track throughout the process Real-time tracking of transactions

Potential of fraud Fraud-proof

Factor Assessment Framework Payments Fit

Intermediary High fees for intermediary? Latency NO – intermediaries as such are not present.
due to processing through
intermediary? Does the intermediary
exist due to lack of trust?

Transparency Are multiple participants involved? Yes – applicant, company, bank, government,
Does increase in transparency into the etc. are involved in the transaction. Higher
transaction help the participants? transparency would increase trust in the
system, and speed up the process.

Information Is the same information being stored in Yes – common information is stored across
Storage multiple locations? Is data consistency the participants such as banks, companies,
an issue? government.

Manual Does the process involve manual Yes – it is required while verifying the
Processing operations? Is the cost of documents. Manual processing is performed
Reconciliation high? by everyone who accepts KYC.

Trust Is there trust among participants? Do Yes – multiple participants are involved in the
multiple participants have the right to transactions and make changes/ issue
modify transactions? Is there a risk of instructions. Since these may be unknown to
fraudulent transactions? each other, there is a lack of trust and
possibility of fraudulent activities.

Documentation Is the documentation paper-based? Is Yes – The applicant statements are all paper-
there a large number of based. This is not due to regulatory reporting
documents/reports required to be requirements.
generated?

Time Sensitivity Will the transactions benefit from Yes – it will help in providing enhanced
being real-time or synchronous? customer experience, and reduce the exposure
risk of banks.

Current Pain Points How Blockchain Can Help

Data integration - Intra-bank applications Real-time data integration across platforms

Expensive technology - Inter-bank applications Cost-effective technology solutions

Evolving regulation - Centralized blockchain-based KYC Compliance with evolving regulations

Fragmented approach - Fraud proof Consolidated and secure approach

INTEGRATION CONCERN
Blockchain applications offer solutions that require significant changes or complete replacement of existing
systems. In order to make the switch, financial institutions must strategize the transition.

CONTROL, SECURITY, AND PRIVACY

While private or permission blockchain and strong encryption exist, there are still cyber security concerns that
need to be addressed before the general public will entrust their personal data to a blockchain solution.

(i) Ledger Level Security: Membership to the blockchain needs to be restricted to participants who
have been subject to required scrutiny. Typically, members will be institutions who have real world
legal credentials and are unlikely to disengage (as opposed to retail users who can withdraw from
participation).
(ii) Network Level Security: Blockchain systems typically consist of multiple subcomponents in
addition to the blockchain software – these may include conventional “shadow” databases,
messaging, and other services. It is recommended that communication between components of
different nodes is made secure from a networking stand point. The network must be resistant to
many different attack vectors, both external and internal to the network.
(iii) Transaction Level Security: Transaction level security is critical for financial institutions.
Transaction accuracy and immutability is what drives the firm's books and records. Relevant details
of transactions must be encrypted using PKI concepts so that transaction details are not
compromised to unintended parties.
(iv) Contract Security: Smart contracts (also called self-executing contracts, blockchain contracts, or
digital contracts) are simply computer programs that act as agreements where the terms of the
agreement can be pre-programmed with the ability to self-execute and self-enforce. Smart contracts
are written using programming languages such as C++, JavaScript, Java, Go, Python, etc. As with
any computer program, there is a possibility that the creator of the contract program intentionally
or otherwise creates a flawed program which can introduce vulnerabilities for the assets controlled
by the contract

UNCERTAIN REGULATORY STATUS

If the government regulation status remains unsettled, blockchain will face a hurdle in widespread adoption
by financial institutions

NASCENT/ EXPERIMENTAL STAGE

While most of the banks have started experimenting or developing proofs-of- concept around blockchain, there
it ill are not any major breakthroughs in blockchain applications in the real sense.

CULTURAL ADOPTION

Blockchain represents a complete shift to a decentralized network which requires the buy-in of its users and
operators.
INITIAL COST

Blockchain offers tremendous savings in transaction costs and time but the high initial capital costs could be
a deterrent, which is a major concern for banks.
 CHAPTER 2 RESEARCH METHDOLOGY

2.1 PROBLEM STATEMENT

The banking and financial services industry is experiencing a significant digital transformation, with
blockchain technology presenting a viable solution to tackle inefficiencies, security risks, and operational
challenges. Although it offers advantages such as decentralization, transparency, and fraud mitigation, the
integration of blockchain within the banking sector is still constrained by regulatory ambiguities, scalability
issues, high costs of implementation, and resistance from established financial institutions. This research
intends to investigate the influence of blockchain on banking and financial services, evaluate its current level
of adoption, and identify the obstacles that hinder its broader implementation. Additionally, the study aims to
examine future trends related to blockchain in financial services, particularly its involvement in Central
Bank Digital Currencies (CBDCs), Decentralized Finance (DeFi), and smart contracts. By pinpointing
essential facilitators and impediments, this research will enhance the understanding of how blockchain can
transform the financial sector and offer strategic recommendations for its successful integration.

2.1 RESEARCH OBJECTIVES

2.2.1 Assess the potential transformations blockchain could bring to banking operations.
2.2.2 Investigate the frequency and effectiveness of blockchain adoption in banking processes.
2.2.3 Explore emerging payment technologies and their adoption in the banking industry.
2.2.4 Examine the key advantages of blockchain adoption for financial institutions.Identify the potential
challenges and risks hindering widespread blockchain integration.
2.2.5 Analyze the most impactful use cases of blockchain within financial services.Investigate how
blockchain optimizes core banking functions such as payments, lending, and compliance.
2.2.6 Apply an augmented Technology Acceptance Model (TAM) to study blockchain adoption drivers.

2.2 DATA COLLECTION

This study predominantly utilizes secondary data sources to investigate the effects of blockchain technology
within the banking and financial services sectors. The information was gathered from a variety of sources,
including academic journals, industry reports, whitepapers, government publications, and case studies from
prominent financial institutions.

2.3 LIMITATIONS
1. Reliance on Secondary Data- This study predominantly utilizes secondary data sources, including prior
research, reports, and industry publications. The validity and relevance of the conclusions drawn are
contingent upon the dependability and recency of these sources. The absence of primary data collection
restricts the capacity to independently verify or authenticate the results.
2. Limitations in Generalizing Findings- The results of this research may not be broadly applicable due to
variations in financial systems, technological frameworks, and regulatory conditions across different regions.
The study may not adequately address localized challenges and opportunities that influence the adoption of
blockchain technology in various banking markets.
3. Challenges in Comparative Analysis- Evaluating blockchain applications across various financial
institutions and sectors presents difficulties due to differences in implementation practices, regulatory
adherence, and levels of technological advancement. These disparities hinder the establishment of a
consistent evaluation framework, potentially introducing biases into the conclusions drawn.

4. Variability Across Regions and Markets -The implementation and effects of blockchain technology differ
markedly across various geographic areas and market segments. Elements such as economic stability,
governmental policies, technological preparedness, and consumer acceptance play significant roles in
determining the success of blockchain. The study may not encompass all these factors, which could limit the
thoroughness of its findings

CHAPTER 3 REVIEW OF LITERATURE

Nurmamat Helil et al. [8] have proposed to use of a CP-ABE access control system with hidden attributes for
the sensitive data set constraint. A flexible, partially hidden constraint strategy is used in this method. Due to
the separation of duties principle, authors plan separates the enforcement of the access control policy and the
constraint policy into two separate entities to increase security. The sensitive data set constraint structure can
be partially changed by the data owner using the hidden constraint policy after the system has been
established.

Xiaodong Yang et al. [9] proposed a technique that has high computing efficiency and that satisfies the
criteria of indistinguishability under chosen-ciphertext attacks. To reduce the computational overhead of
both local and outsourced servers, they also use outsourcing technologies and selected decryption
techniques.

C. Li et al. [10] proposed a multi-Cloud architecture that uses a CP-ABE access control mechanism that
protects privacy. It is possible to assure that only a portion of the user attribute set can be retrieved by a
single Cloud by enhancing the conventional CP-ABE algorithm and providing a 14 proxy to cut the user's
private key, thereby protecting the privacy of user attributes. The access policy is effectively kept private
since only the information about the leaf nodes is saved in the ciphertext while the intermediate logical
structure of the access policy tree is kept in proxy. According to a security study, their system is resistant to
user collusion attacks as well as replay and man-in-the-middle attacks.

Jiaxing Li et al. [11] have proposed Block-secure, which is Blockchain-based secure P2P Cloud storage that
provides security over the data. In this solution, they have used Blockchain to store data like file URLs, File
replica URLs, Hash, Transaction details, and keys. They used a customized genetic algorithm to improve the
performance of distributed architecture. They have compared multiple users with a single data center, and
multiple users with multiple data centers using Blockchain and genetic algorithm. The file loss ratio is
claimed to be low. 2.1.2 Blockchain Techniques for Cloud Storage This section illustrates methods to protect
Cloud data using Blockchain technology.

Sukhodolskiy and Zapechnikov [12] have proposed a smart contract-based access control scheme based on
the Blockchain that increases data security. In this system, a smart contract is employed to manage the
access control mechanisms through an improved attribute-based encryption scheme. All information,
including the public link, hash code, and access regulations, is saved in the contract files and the file is
encrypted by the owner. All agreements and certificates pertaining to file access, editing, and deletion are
managed by the Ethereum virtual machine.

Ramamoorthy and Baranidharan [13] have proposed a system that gives users more control over data access
and modification and more security. More data security is provided through the use of Blockchain, which
also limits criminal activity.
 Xue and Xu et al. [14] have proposed a smart contract-based Dstore for managing lease relationships. It
manages leasing relationships automatically without the interference of any third party, as well as validating
the accuracy of data and storing it for the payment process.

Liang and Shetty et al. [15] have proposed a method called Provchain that utilizes a Blockchain based
auditing system for data provenance. Every transaction generates a receipt for each piece of data for
validation and is logged with an immutable timestamp. The system offers users reliability, privacy, and
transparency. 15

Yue and Li et al. [16] have proposed a framework for integrity verification that makes use of the Merkle tree
and sample verification. The effectiveness of verification is improved by the use of a sample strategy. Using
Blockchain technology and sampling, it eliminates mistrust that occurs in a traditional environment.
Wei and Wang et al. [17] have proposed a "block-and-response system" to verify the data's integrity. Smart
contracts use the Merkle hash tree to track any data changes. When data is accessed through the Cloud, a
warning message is automatically sent to the user. This system efficiently handles integrity verification and
responds quickly.
Omar and Bhuiyan et al. [18] have proposed a MediBchain that uses Blockchain technology to handle data
stored in the Cloud. The Blockchain's users and users control communication through a privately accessible
unit. The Blockchain is used to keep all the metadata, while the Cloud is used to store the encrypted patient
data.
Li and Wu et al. [19] have proposed an innovative plan that eliminates deduplication utilizing Blockchain
technology and also handles file recovery for lost or changed files. Smart contracts allow automatic
transactions to be completed without the involvement of a third party.

Kumar and Singh et al. [20], Pourmajidi and Miranskyy [21], and Sutton and Samavi [22] have proposed
techniques that use Blockchain technology to offer immutable log storage. In their systems, every transaction
is recorded on an immutable, tamper-proof Blockchain block.

Qin and Huang et al. [23] proposed a BMAS Blockchain-based multi-authority Access Control method that
uses the use of Blockchain technology to reduce the single point of failure of the CP ABE scheme. This
strategy makes use of the Blockchain with permissions and Shamir's secret sharing method.

Wang et al. [24] have proposed tracing of the access control system and access to data used for a specific
time period. It communicates with the system through smart contracts, and the data owner saves encrypted
data on the Blockchain.

Yang and Chen et al. [25] have created hidden access policies using CP-ABE. To regulate how public key
shares are distributed to users in this work, they have simply used attribute authority. The key for decryption
 and storage access communication is generated by the user who has access 16 to the data. In this study, all
activities are carried out by the data owner, who also uploads values to the Blockchain network. Li [26] have
proposed a Blockchain-based system with verifiable access rules. They created a network for exchanging
data by giving nodes distinctive IDs and implementing an access mechanism. The data user gives access
information, including the URL and public key, and verifies the data using a signature recorded on the
Blockchain network.

Zhao and Zhang et al. [27] used a Blockchain network that is built on Java to register a client with attribute
authority. A precise access control system is claimed to handle attribute modification. The mechanism for
managing key generation is called the CP-ABE scheme.
Sammy and Vigila [28] have used Elliptic Curve Cryptography (ECC) to implement a CP-ABE scheme for
patient health records with a hierarchical access structure. Access control is managed via dynamic
characteristics to support multiple authorities for data access.
Xue et al. [29] proposed a dynamic access control system on Cloud storage for the most secure
communication. They used the most secure policy in data access control techniques on public Cloud storage
ciphertext-policy attribute-based encryption.
Hao and Huang et al. [30] have created an attribute-hiding strategy and fine-grained data access control on
Cloud storage with IoT. It demonstrates how a secure channel of faster communication is provided by an
access control system
. Lewko et al. [31] introduced a Boolean formula-based multi-authority attribute-based encryption system.
They came up with a strategy to protect the system from collusion attempts. Benil et al.
[32] utilized Elliptic Curve Cryptography (ECC) to encrypt medical data before sharing it on Cloud storage
and the Certificate Less Aggregate Signature (CAS) technique to create the digital signature.
Wang et al. [33] created a fair payment smart contract for Cloud storage on the Blockchain. The payment
system uses smart contracts. Sharma et al.
[34] implemented a system by using User revocation techniques to construct a system with the Ciphertext
Policy Attribute-Based Encryption (CP-ABE) algorithm, which provides access control in the Cloud storage
system.

CHAPTER 4 DATA ANALYSIS AND INTERPRETATION

 4.1 DESCRIPTION OF THE FUTURE ROLE OF BLOCKCHAIN TECHNOLOGY IN
BANKS

Financial institutions everywhere have shifted to mobile banking and other digitalization-driven business
models. However, the measures have been largely overlooked in the banking industry. Banks’ hesitation
contrasts with other industries’ enthusiasm for blockchain technology. The market for blockchain technology
is predicted to increase from $4.9 billion in 2021 to over $67.4 billion in 2026.

Table 4.1: Description of the future role of Blockchain in Banks

Future Role of Blockchain in Banks Frequency Percent

Under discussion 98 21.40

Active research and development 187 40.90

In use alongside existing processes and systems 84 18.40

Necessary for operations 56 12.30

No role/I don’t know 32 7.00

Total 457 100.00

Table 4.1 explores the future role of blockchain technology in banking. It is observed that 40.90% of
the respondents are described as being in an “active research and development” stage in the acceptance
of blockchain in banks. Following that, 21.40% of respondents mentioned “under discussion”,
18.40% of respondents stated “in use alongside existing processes and systems”, 12.30% of
respondents mentioned “necessary for operations” and 7% of respondents said “no role/I don’t know”
in the future role of blockchain in banks. Hence, it is inferred that banks have been involved in many
economic and financial operations for centuries, including lending, trade, transaction settlement and
payment processing. However, the industry’s history has rendered it stagnant and difficult to develop.
In its current state, the industry is progressing steadily due to constant demand, but it is too slow to
innovate. There is still a significant amount of paperwork involved in the banking industry, along with
several processes that are both time-consuming and expensive.

4.2 FREQUENCY OF BANK BENEFITS MOST FROM BLOCKCHAIN CASES

 The applications of blockchain technology in banking can be seen in a variety of
different operations. The blockchain technology may very well end up being a game-
changer. The researchers forecast a wide range of benefits wherever banks use
blockchain. If widespread implementation occurs, blockchain technology will make it
possible for financial institutions to process payments more rapidly and precisely while
simultaneously lowering the costs associated with transaction processing and
eliminating the need for exceptions (Consultancy.uk, 2016).
Table 4.16: Frequency of Bank Benefits from Blockchain Use Cases

Blockchain Use Cases Frequency Percent

Digital currency/payments 112 24.50

Digital asset ownership and transfer 62 13.60
Data storage 54 11.80
Legal/regulatory 32 7.00
Smart contract 47 10.30
Digital identity 96 21.00
Anti-counterfeiting 23 5.00
Intellectual property protection 31 6.80
Total 457 100.00

Table 4.16 shows the benefits of blockchain use cases in banking. It can be observed that
24.50% of the respondents stated “digital currency/payments” as the bank benefiting most from
blockchain use cases. 21% of the respondents mentioned “Digital identity” as the second most
benefited from blockchain use cases, while 13.60% of the respondents identified “Digital asset
ownership and transfer” as the third most benefited from blockchain use cases. While 11.80% of the
respondents stated “data storage” as the fourth most beneficial and 10.30% of the respondents stated
“smart contract” as the fifth most beneficial, 7% of the respondents said “Legal/regulatory” as the
sixth most beneficial, 6.80% of the respondents described “intellectual property protection” as the
seventh most beneficial and the least 5% of the respondents stated “anti- counterfeiting” as the eighth
most beneficial of blockchain use cases in banking. Hence, it is inferred that digital currency, digital
identity and digital asset ownership and transfer are the areas where the most banks benefit from
blockchain use cases. Many blockchain applications in banking can improve existing processes and
procedures. Most likely, banks will use blockchain technologies meant to operate outside the existing
system. If that happens, the blockchain challenge to the sector will
 Intellectual property 6.80%
protection
Anti-counterfeiting 5.00%

Digital identity 21.00%

Smart contract 10.30%

Legal/regulatory 7.00%

Data storage 11.80%

Digital asset ownership and transfer 13.60%

Digital currency/payments 24.50%

0.00 5.00 10.00 15.00 20.00 25.00 30.00

4.4.1 Figure 4.16: Frequency of Bank Benefits from Blockchain Use Cases

4.4.2 FREQUENCY OF MOST SIGNIFICANT ADVANTAGE OF

BLOCKCHAIN TECHNOLOGY

The most respondents frequently mentioned advantage of blockchain over current systems is
greater transaction speeds. This shows banks are interested in exploiting blockchain’s real-time
information exchange capabilities to speed up business operations and operational efficiencies.
Table 4.17: Most Significant Advantage of Blockchain Technology

Advantages of blockchain technology Frequency Percent

Lower cost 46 10.10

More secure 71 15.50
New business models 43 9.40
New revenue sources 38 8.30
Greater transaction speed 98 21.40
More transparent 89 19.50
More automated 60 13.20
None 12 2.60
Total 457 100.00
 Respondents tend to cite “greater transaction speed” (21.40%), “more transparent” (19.50%),
“more secure” (15.50%) and “more automated” (13.20%) as major advantages of blockchain
technology over “lower cost” (10.10%), “new business models” (9.40%) and “new revenue sources”
(8.30%). Indeed, banks looking to implement new blockchain solutions may not see immediate
savings from their efforts, as they will likely continue to support existing systems until they can be
completely old and replaced. Some respondents believe that blockchain can unleash new revenue
sources and business models, highlighting its disruptive potential.

25.00
21.40%
19.50%

20.00 15.50%
13.20%
10.10% 9.40%
15.00 8.30%

2.60%
10.00

5.00

0.00

Figure 4.17: Most Significant Advantages of Blockchain Technology

FACTORS INFLUENCING PREVENT BANKS FROM INVESTING
IN BLOCKCHAIN

Financial institutions must be adaptable and open to change in order to implement blockchain
technology. Many of the barriers to adoption in government are not related to technology itself, but
rather to legislation, security and general opposition to change. Table 4.18 depicts the factors
influencing and preventing banks from investing more money in blockchain technology.
 Table 4.18: Factors Influencing Prevent Banks from Investing in Blockchain

Factors Influencing Prevent Banks from

Frequency Percent
Investing in Blockchain Technology

Lack of knowledge by management 53 11.60

Cost of setting up blockchain infrastructure 41 9.00

Cost of training or hiring staff 35 7.70

The technology is not mature enough 62 13.60

Not a current business priority 39 8.50

Potential security threats 106 23.20

Regulatory/legal concerns 91 19.90

No barriers 12 2.60

I don’t know 18 3.90

Total 457 100.00

4.4.1 Banks face many challenges in investing in blockchain, with the most common being potential
security threats (23.20%), regulatory/legal concerns (19.90%), the technology is not mature
(13.60%), lack of knowledge by management (11.60%), cost of setting up blockchain
infrastructure (9%), not a current business priority (8.50%), cost of training or hiring staff (7.70%)
and so on. However, Blockchain has far-reaching implications for the financial industry,
encouraging an increasing number of banks, insurers and other financial institutions to engage in
research into the technology’s possible uses.

THE IMPLEMENTATION RISKS OF BLOCKCHAIN TECHNOLOGY IN BANKS

While blockchain has great transformational potential, its acceptance and execution is fraught
with risks. Acceptance of information technology, automation and technical innovation has been
moderate in emerging countries, signifying a lack of enthusiasm for the implementation of new
technologies.

Table 4.20: Frequency of Implementation Risks of Blockchain in Banks

Implementation Risks of Yes No

Blockchain Systems in Banks Frequency Percent Frequency Percent
Adoption cost 139 30.40 318 69.60
 Interoperability 382 83.60 75 16.40
Scalability/technical risks 395 86.40 62 13.60
Consensus mechanism 193 42.20 264 57.80

Energy consumption 141 30.90 316 69.10

Cybersecurity 371 81.20 86 18.80
Latency 153 33.50 304 66.50
Reversibility 206 45.10 251 54.90
Regulation 334 73.10 123 26.90

The majority of the respondents intend to cite scalability/technical risks as the most
implementation risks of blockchain technology in banking sector, with “Yes” (86.40%) and “No”
(13.60%), interoperability with “Yes” (83.60%) and “No” (16.40%), cybersecurity with “Yes”
(81.20%) and “No” (18.80%) as the most significant advantages of blockchain applications and
regulation with “Yes” (73.10%) and “No” (26.90%), reversibility with “Yes” (45.10%) and “No”
(54.90%), consensus mechanism with “Yes” (42.20%) and “No” (57.80%), latency with “Yes”
(33.50%) and “No” (66.50%), energy consumption with “Yes” (30.90%) and “No” (69.10%) and
adoption cost with
“Yes” (30.40%) and “No” (69.60%). Hence, it can be inferred that scalability, interoperability,
cybersecurity and regulations stand at the forefront as the biggest obstacles to the adoption of blockchain
technology in banks. With the help of technology providers, financial institutions should deliberately,
structurally and diligently address these risks and challenges.

26.90%
Regulation 73.10%

Reversibility 54.90%
%
45.10
Latency 66.50%
33.50%
18.80%
Cybersecurity 81.20%

Energy consumption 69.10%

30.90%

Consensus mechanism 57.80%

42.20%

Scalability/technical risks 13.60%

86.40%
16.40%
Interoperability 83.60%

Adoption cost 69.60%

30.40%
0.00 10.00 20.00 30.00 40.00 50.00 60.00 70.00 80.00 90.00 100.00

No Yes

Figure 4.20: Frequency of Implementation Risks of Blockchain Systems

FREQUENCY OF AWARENESS AND KNOWLEDGE OF BLOCKCHAIN TECHNOLOGY
ACCEPTANCE AMONG BANK EMPLOYEES
The blockchain technology has the potential to provide a significant benefit by fostering a
sense of consensus and trust among the many participants. This showed that the bank was aware of the
benefits that would result from the use of the blockchain technology. This awareness is evidenced by
the various attempts that have been launched in an effort to promote the adoption of technology
(Dicuonzo et al., 2021).
Table 4.21: Awareness and Knowledge of Blockchain among Employees

Awareness and Knowledge of Blockchain Frequency Percent

Acceptance among Employees
Yes 393 86.00

No 25 5.50

Not sure/Maybe 39 8.50

Total 457 100.00

Table 4.21 shows that the majority of the 86% of respondents are interested in awareness and
knowledge for the acceptance of blockchain technology in banks. 8.50% of respondents said “Not
sure/Maybe” and 5.50% of the respondents cited “No” for awareness and knowledge of blockchain
among bank employees. An increasing number of efforts are being made to facilitate a cultural
exchange between start-ups and bankers.

100.00
86.00%
90.00

80.00

70.00

60.00

50.00

40.00

30.00

20.00 5.50% 8.50%

10.00

0.00
Yes No Not sure/Maybe

Figure 4.21: Awareness and Knowledge of Blockchain among Employees

4.5 INFERENTIAL ANALYSIS OF THE NEW TECHNOLOGICAL PAYMENT
METHODS FOR ONLINE FINANCIAL TRANSACTIONS AND
BLOCKCHAIN TECHNOLOGY ACCEPTANCE IN FUTURE BANKING

This section shows the inferential analysis of the usage pattern of digital payment services and
other dimensions of blockchain technology acceptance in future banking services.

AWARENESS OF BLOCKCHAIN TECHNOLOGY IN BANKING SECTOR BASED ON

RESPONDENTS’ POSITION

The Pearson Chi-Squared statistic is used in the Test of Independence. To analyse this statistic,
one can compare it to a critical value obtained in a Chi- Square distribution, but it is simpler to use
SPSS’s p-value. The result labelled “Asymptotic Significance” should be less than 0.05 which is the
alpha level associated with a 95% confidence level. The relationship between the awareness of
blockchain technology in the banking sector based on respondents’ positions is given in Table 4.22.

Null Hypothesis H01: There is no relationship between the awareness of blockchain

technology in banking sector based on respondents’ position.

Table 4.22: Chi-Square Test for Relationship Between the Awareness of Blockchain Technology
in Banks Based on Respondents’ Position

Awareness of Blockchain Awareness of Blockchain Respondent’s

and Position Technology in Banks Position
Chi-Square 143.453a 61.676b

Df 2 4

Asymp. Sig. .000 .000

 It is inferred that the p-value is less than 0.05, indicating that the null hypothesis is rejected at
a 5% level of significance. Thus, there is a highly significant relationship between the awareness of
blockchain technology in the banking sector and employees’ positions. It is determined that bank
employees are aware of the blockchain technology in banks. All the different categories of bank
employees know about this disruptive technology.

FREQUENCY OF USAGE OF DIGITAL PAYMENT SERVICES BETWEEN THE AGE GROUP

OF RESPONDENTS

To assess independence, Pearson Chi-Square is applied. This statistic may be compared to a

crucial value in a Chi-Square distribution, but using SPSS’s p-value is easier. The p-value of the Chi-
Square statistic should be less than 0.05. The relationship between the frequency of usage of digital
payment services between the age groups of respondents is given in Table 4.23.

Null Hypothesis H02: There is no significant relationship between the frequency of usage of digital
payment services and the age group of the respondents.

Table 4.23: Chi-square Test for Significant Relationship in Frequency of Usage of Digital Payment
Services Between the Age Group

Usage of Digital Payment Usage of Digital Age Group

and Age Group Payment Services
Chi-Square 151.724a 79.691b

Df 2 3

Asymp. Sig. .000 .000

It is inferred that the p-value of 0.000 for usage of digital payment services is less than the
significant value of 0.05 at the 5% level of significance. Hence, it is evident that there is a significant
relationship in the frequency of usage of digital payment services between the age group of the
respondents.

4.5 FACTORS INFLUENCING THE IMPACT OF BLOCKCHAIN

TECHNOLOGY ACCEPTANCE AND IMPLEMENTATION RISKS IN
BANKING INDUSTRY – AN AUGMENTED TECHNOLOGY
ACCEPTANCE MODEL (TAM)

The literature used in various research studies suggests that the researcher has designed a
framework for blockchain technology and implementation risks in the banking industry. In this
section, the research model used for blockchain technology acceptance on financial transactions and
implementation risk in the banking industry is discussed. The study used SPSS version 21 to process
the collected data with descriptive statistics. The measurement items under the acceptance of
blockchain technology in the banking industry exhibited the mean perception of the respondents. For
this study, TAM was used as the baseline
model because it is a well-tested model concerning employees’ acceptance of technology. TAM has
been used by various researchers to predict employees’ intention to accept or adopt a variety of new
technologies and information systems.

However, there is no existing literature on using TAM in the context of real-world blockchain
technology acceptance in the banking industry, indicating a significant gap in knowledge. To fill this
research gap in the existing literature, this study applies the augmented TAM-based Blockchain
Technology Model to banking systems, using participants who were aware of the blockchain
technology before they filled out the questionnaires. The study will examine the strength of the
hypothesised relationships embedded model’s ability to predict employees’ behavioural intentions to
adopt blockchain technology in the Indian banking industry.

The blockchain is a new platform for the distribution of digital banking services. This
disruptive technology is transforming the banking industry in many ways. From a banker’s
perspective, it is interesting to understand and assess bank employees’ behavioural intention to use
blockchain applications for financial transactions in the future. This study aims at exploring the
measurement scales used in blockchain technology acceptance and implementation risks in the
banking industry, such as perceived usefulness, perceived ease of use, perceived privacy, perceived
security, attitude, perceived trust, efficiency, immutability, transparency, transaction, design,
perceived risk, interoperability, scalability, cybersecurity, reversibility, regulation, behavioural
intention to use and actual system use. The various measurement scales identified for these constructs
are examined to show whether the objectives confirm the findings.
 CHAPTER 5 CONCLUSION

Blockchain technology has emerged as a transformative force within the banking and financial
services industry, providing significant advantages such as improved security, transparency, and
operational efficiency. This research demonstrates that the decentralized nature of blockchain has the
capacity to reduce fraud, expedite transactions, and fundamentally alter the operational landscape of
financial institutions. The study underscores the profound effects of blockchain on various banking
activities, including payments, lending, regulatory compliance, and the management of digital assets.
A notable conclusion drawn from this research is that blockchain markedly diminishes the
dependence on intermediaries, which in turn lowers transaction costs and enhances operational
efficiency. Conventional banking systems typically involve numerous verification layers, leading to
delays and increased expenses. The capability of blockchain to facilitate real-time transaction
processing and utilize automated smart contracts addresses these inefficiencies, rendering financial
services quicker and more accessible. Moreover, its immutable ledger guarantees that all transactions
are securely documented, thereby minimizing the risk of fraud and unauthorized alterations.
Nevertheless, despite these benefits, the adoption of blockchain in banking remains in its nascent
stages, encountering several significant obstacles. Regulatory ambiguities, interoperability
challenges, and scalability concerns continue to impede widespread implementation. Financial
institutions are often hesitant to revamp their existing systems due to the substantial initial costs
associated with blockchain integration and the absence of standardized regulations across various
jurisdictions. Additionally, cybersecurity threats and the potential for illicit activities present further
challenges that must be resolved before blockchain can attain widespread acceptance in the banking
sector. The research also highlights the increasing interest in blockchain applications beyond
traditional payments, particularly in domains such as Central Bank Digital Currencies (CBDCs) and
Decentralized Finance (DeFi).
The emergence of Central Bank Digital Currencies (CBDCs) signifies a transformative development
in monetary policy, enabling governments to issue digital currencies that are supported by blockchain
technology. In contrast, Decentralized Finance (DeFi) removes the necessity for conventional
financial intermediaries, thereby granting open access to financial services via decentralized
platforms. Furthermore, asset tokenization, which entails the conversion of tangible assets into digital
tokens on the blockchain, holds the potential to transform investment markets by enhancing liquidity
and accessibility. Despite existing challenges, the outlook for blockchain technology in the banking
sector appears optimistic. Financial institutions must prioritize the resolution of regulatory and
technical obstacles by engaging in collaboration with policymakers and technology providers to
establish a secure and scalable blockchain ecosystem. Moreover, banks should allocate resources
towards employee training and technological innovation to facilitate the smooth integration of
blockchain into their operations. In summary, blockchain technology is not merely a fleeting trend; it
is a transformative force that is redefining the financial landscape. Although its complete potential
has yet to be fully realized, the advantages of security, transparency, and efficiency render it an
essential instrument for the future of banking. With an appropriate regulatory framework,
technological progress, and industry collaboration, blockchain can lead to the development of a more
inclusive, efficient, and resilient financial system.