The publicly traded IT giant, Infosys Ltd. (INFY) is creating a blockchain network for banks in India. The fintech solution will be designed to improve efficiency and security in trade finance for the banking sector.
Infosys has partnered with seven private banks in India, including ICICI Bank Ltd, Axis Bank Ltd, Kotak Mahindra Bank Ltd, Yes Bank Ltd, IndusInd Bank Ltd, RBL Bank Ltd and South Indian Bank Ltd. In this partnership, they have developed India Trade Connect (ITC) as a blockchain trade network to facilitate the processing and execution of banking transactions without the need for systems of trust that require human review processes.
Using the ITC network, buyers, sellers, banks and regulators will have access to the blockchain network, where they may conduct transactions in a way that is transparent, secure and automated. If successful, the result will be better risk management in both trade and supply-chain financing.
The end result of ITC network will be the tokenizing a number of trade finance business processes for the various banks. These processes include validation, certification and payments fulfillment, using Distributed Ledger Technology (DLT). In addition, other actions will be transferred to the blockchain, including the issuance of letters of credit, the creation of new accounts, collections, transactions, and the financing of purchase orders and invoices.
ITC’s future plans include development as a scalable system that will be compatible with a number of other blockchains. These include Hyperledger, Corda, Ethereum, and Bitcoin. It is already in use by the banks as part of a pilot program to facilitate trade finance process requirements. By definition, trade finance signifies financing for both domestic and international trade transactions, between a seller and a buyer, where banks often act as intermediaries. In the case of an exporter acting as the seller, and an importer acting as the buyer, a letter of credit from the issuing bank would guarantee payment upon documentary proof of shipment of the goods. Using blockchain technology and smart contracts, such proof of shipment could be digitized, making for a trustless and efficient upgrade to the current process.
Sanat Rao, Chief Business Officer at Infosys Finacle said, “Blockchain technology offers unprecedented opportunities to transform banking as we know it. Like any innovative technology, the usage of blockchain-based applications will gradually increase from early adopters to others who will join based on proven and tangible benefits. At Infosys Finacle, we are committed to reimagining banking and providing a continuous thrust on collaboration with our clients. In pursuit of this, digitization of trade finance processes using distributed ledger technology offers immense potential to eliminate friction, cut costs and increase revenue through new business products that are now viable using modern technologies. Infosys Finacle is committed to helping our clients realize the path breaking benefits of blockchain technology and we look forward to many more collaborations to strengthen this consortium and to building other networks around the world.”
India Trade Connect boasts a 75% improvement in the cycle time for letters of credit. It won the Celent Model Bank Award for 2018, and plans to expand on the current list of seven banks in its network. Current trade finance processes are plagued with legacy systems and challenges, such as the lack of agility and transparency, and fraud. Infosys Finacle therefore created this ecosystem, in partnership with the various stakeholders to solve these problems, and to show Proof of Concept as a first step in completely transforming the model on a global scale.
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