Indian software giant Infosys sets up a blockchain trade network with 7 banks

• Infosys creates, tests blockchain-based document-tracking system.
• Solution named India Trade Connect will help banks track trade documents digitally.
  
• Seven Indian private banks including Axis Bank, Yes Bank and ICICI Bank are implementing India Trade Connect.

Infosys, one of the software giants in the country, has set up a blockchain-based document-tracking system for trade finance and is currently testing it. The solution named India Trade Connect aims to increase the security and efficiency of the banking sector and now has seven Indian private banks – ICICI Bank, Axis Bank, Yes Bank, IndusInd Bank, Kotak Mahindra Bank, RBL Bank and South Indian Bank – on board.

At the heart of the Rs 1,400 crore (approximate) Nirav Modi-Mehul Choksi scam, where three jewellery firms defrauded India’s second biggest state-run lender Punjab National Bank scam, is lack of transparency and accountability.

The blockchain-based trade finance network will make the transactions more transparent for all stakeholders in any undertaking. The solution, earlier called Finacle Trade Connect, and now rechristened as India Trade Connect, will allow the document-heavy, process-heavy trade financing to happen digitally.

How does a blockchain network function?

India Trade Connect will help digitise the various processes in trade financing, including validation of ownership, certifying documents, making payments, collection of bills, and producing letters of credit and even invoice financing.

Blockchain technology stores details of every transaction securely shared between all the parties involved, say for instance, a buyer, the buyer’s bank, a seller and the seller’s bank. This is more efficient than each bank working on its own.

In an interview with the Economic Times, Sanat Rao, chief business officer at Infosys Finacle, said, “Because of the network effect, where a buyer, the buyer’s bank, the seller and the seller’s bank are all on the platform, it creates a single source of truth.

Banking and blockchain

Earlier this week, on May 14, HSBC Holdings claimed it had performed the world’s first trade finance transaction on a shared blockchain platform. Prior to this, no trades used a single, shared digital application.

This is not the first time that Indian banks have attempted to integrate blockchain into their systems. In June last year, ICICI Bank, DCB Bank, and Deutsche Bank, to name a few stakeholders, partnered with Microsoft to develop blockchain platforms for the Indian banking sector. It was called BankChain.

Blockchain started off being a giant, decentralised ledger for bitcoin (digital currency) that records every transaction and stores information about it on a global network. This data is highly secure and cannot be tampered with.

Banks and other financial institutions back and invest in blockchain technology because it cuts their costs and makes operations faster, transparent and automated. “The framework of India Connect is said to be ledger agnostic and capable of working with other blockchain platforms like Bitcoin, Hyperledger, Ethereum and Corda,” Rao said.