Systematic review on blockchain adoption in banking

In Gandhi, Rupali, et. al (2019), a comparison of the current banking system and the proposed system based on the blockchain technology was carried on to study the feasibility of blockchain technology in the banking system. The real time execution of the banking based on blockchain is to be studied further and remains a challenge to the implementers and decision makers. The model needs to be tested further.

Also Read: Systematic Review On Blockchain Adoption In Banking-chapter 1

Yusof, Munir, et. al. (2018) research is aimed at investigating the factors influencing the behavioral intention to adopt blockchain technology by the Malaysian banking institutions. Unified Theory of Acceptance and Use of Technology (UTAUT) with key determinants such as Performance Expectancy, Effort Expectancy, Social Influence and Facilitating Condition has been adopted in this study. Using questionnaire instruments, 149 data from banking respondents in five states have been collected and analyzed. Of the four key determinants, only Effort Expectancy shows an insignificant relationship with the behavioral intention to adopt blockchain technology. The research should be tested with more rigor and variables and in other contexts as well.

K Meenakshi and George (2018) highlight one of the initiative that can be taken by banks to attain sustainability to a great extent. BlockChain technology being solution to major problems can be implemented in banking process to eliminate unwanted procedures, intermediaries and to go paperless, which enables bank to provide environmental-friendly service. The absence of a common record is a very costly problem, BlockChain resolves that challenge. Blockchain adoption saves natural resources. Adoption of BlockChain will definitely be a major change in the banking history because it is like banking without much of paper involvement and time consumption being minimal. The accountability factors will be enhanced such that any fraud committed can be detected immediately and actions can be taken immediately. The cost of maintenance of records and other data will also be reduced to great extent because of digitalization of transaction. Blockchain can do to banks what the internet did to media. Customer failing to understand the working of Blockchain will still be dependent on physical banks. Certain banks have taken initiatives to adopt Blockchain technology because ease of operation and research is being carried out in this field. To conclude that the blockchain will reduce the use of natural resources, more work should be done to analyse the impact of energy requirements in natural resources.

Popova and Butakova (2019) discuss the use of blockchain technology without tokens to protect information about banking transactions, namely, transfer amounts, card details, names of participants, etc. This topic is relevant as the digital economy is becoming an integral part of modern life. The article analyzes the protection mechanisms of distributed databases, proposes a solution to the problem of maintaining the uniqueness of information in them based on blockchain technology without tokens and gives recommendations on the introduction of blockchain technology into modern banking systems. The blockchain is a tool which at implementation in the Banking system without mining and tokens will considerably simplify processes of maintenance of integrity and uniqueness of information on bank transactions, and its implementation in the processes of smart contracts will allow to reduce number of participants at commission of some transactions. The practical aspect of the proposed solution could be tested empirically.

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Mohite (2018) helps to understand of blockchain technology and its emergence, some useful insight on regulatory challenges on the world wide adoption of this new technology in general and India in particular and finally, the purpose of this article is also to enhance the reader’s understanding regarding the challenges to be encountered in future particularly by financial service providers in India due to the disruptions caused by rapid advances in technology. This article enunciates the conceptual framework and outlook of blockchain technology in general.

Future Challenges: Development and Applications. This technology is still being developed as experts and practitioners are apprehensive to applications in real life.

Regulatory Challenges: Till now, the one block chain applications have received most of the regulatory attention is Bit-coin or virtual currency to be more precise.

Cyber-Security: Much has been told in the past regarding the dangers and risk associated with the cyber security environment.

In Bates and Paul Migliore (2018) the authors explore the transformative technologies that will drive digital insertion efforts in the future, how asset managers will need to differentiate themselves in the new digital landscape and practical steps to embrace the digital frontier for organisations that are still held back by legacy technology, processes and behaviours. investment managers have been digitising information and processes, but we have only recently moved into a new era where firms are reengineering every facet of the business upon a digital foundation. The future state design options should be derived through an open dialogue with vendors about their current and future product offerings. Leveraging the resources and scale of an external provider helps asset managers mitigate risk by minimising initial investment and leveraging technologies tested by a subset of their peer group. These consider ations will become increasingly important components to a future state options analysis as the competitive landscape shifts to automation, processing of complex data and sophisticated AI toolsets. This paper considers all the innovative technologies and give reasons to either innovate or stagnate.

Umarovich and Natalia (2017) conduct the research of current trends and priorities for the blockchain technology use in order to ensure the economic security of large corporate entities. The subject of the research is a set of economic and organizational and financial relations ensuring the financial controlling effectiveness in large corporate entities, implemented with the blockchain technology application. A conceptual analysis of the current use of blockchain technology has been used to see the future road to its implementation. The application of blockchain can be further analysed in the light of significant proof. The conducted analysis of the blockchain application risks and benefits demonstrates the need in balancing risks and benefits of this technology application. In the Russian practice the named trend is supported: the most frequently the blockchain technology is used in financial markets.

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Azarenkova and Shkodina (2018) focused on proposing the ways to reduce the negative impact of financial technologies on the financial system stability. The analysis of the financial technologies impact on the stability of financial system shows that the lack of institutional support for new financial technologies is the most important catalyst for the financial industry destabilization and the formation of financial bubbles in various market segments. This paper considers the application of new technology at global level. The global scenario does not allow to study in an organized and regulated manner. Country specific proofs are required.

Petrushenko and Kozarezenko (2018) identify disruptive challenges for financial institutions need to adapt. The aim of the research is to investigate the prospects of FinTech engagement into the system of international transfers processing in Ukraine. The research investigates the value and the investment flows structure as most obvious indicators of FinTech and describes types of payments relationships there. The paper considers relationships between enterprises, financial institutions and individuals, which are formed in digital payments. conducting a comparative analysis of the regular and innova- tive cross-border payment processes, developing a methodology for evaluating the impact of FinTech engagement into the system of cross-border payments in Ukraine, and investing foreign experience of FinTech start-ups participation in the international money transfers system. The paper shows that investments and profits of cross-border payment solution can vary significantly between countries, since each country has separate and diverse national payment systems. FinTech can help to proceed in this direction enhance the system and allow people to proceed more effective. There is a high potential of FinTech for cross-border payment processing in near future.

Cocco, Pinna, et. al. (2017) paper looks at the challenges and opportunities of implementing blockchain technology across banking, providing food for thought about the potentialities of this disruptive technology. defined three quantities: “economic efficiency”, “operational efficiency”, and “efficient service”. First EE, defined as as the ratio between the value of Bitcoins mined by the power consumption of 1 kWh, is characterized by a strong variability because it is influenced by the growing of the Bitcoin price.the Bitcoin popularity and the power consumption of the network. Second, we found that the OE, defined as the ratio between the value of voluntary fees and the energy cost of a transaction, is currently growing, indicating that fees are becoming more and more important to assure the sustainability of the Bitcoin system. In fact, mining operations will be remunerated only until the sum of circulating Bitcoins reaches 21 million. SE, defined as the ratio between the number of transactions validated by the power consumption of 1 kWh, which describe how much electricity the network spends to number of transactions per block is limited, and the SE cannot increase/perform its main service, i.e to wire Bitcoin.

In Christopher (2019) the bridging model is applied first to traditional banking, to illustrate and analyze the enforcement mechanisms underpinning the U.S. dollar as currency and the banking system as a whole, and to demonstrate that the enforcement mechanisms (government backing and regulation) are not as robust as generally believed. The bridging model is then applied to Bitcoin, to show not only that the system requires more trust than is generally understood, but also that both currency and payment systems benefit from the involvement of trusted intermediaries in response to problems and crises. This article undertakes a critical deconstruction of Bitcoin and the blockchain, their themes of democracy and transparency, and the idea that they are trustless. The article enforcement and trust in contract formation model, which allows for a more nuanced understanding of the interplay between conceptualization of the role of trust in business and contracting: the bridging then proposes a new framework. The Bridging Model Applied to Traditional Banking: As an illustration of the bridging model in application, this Part applies the model to traditional banking, understood roughly here to mean the brick-andmortar U.S. banking system of the past hundred years or so. Although Bitcoin contains mechanisms that make it predictable and reliable-the regular production of Bitcoins, the publicly verified ledger-these mechanisms still rely on human involvement. Moreover, the Bitcoin code may strip away instances where trust and human overrides are actually preferable, in that they allow considered responses to unanticipated problems. More imperial research is needed to verify and establish the bridging model in Bitcoin technology.

In Gandhi, Rupali, et. al (2019), a comparison of the current banking system and the proposed system based on the blockchain technology. To study the feasibility of blockchain technology in the banking system. A proposed model for integration of blockchain into banking. The real time execution of the banking based on blockchain is to be studied further and remains a challenge to the implementers and decision makers. The model needs to be tested further by some use cases in the area.

Yusof, Munir, et. al. (2018) research is aimed at investigating the factors influencing the behavioral intention to adopt blockchain technology by the Malaysian banking institutions. Unified Theory of Acceptance and Use of Technology (UTAUT) with key determinants such as Performance Expectancy, Effort Expectancy, Social Influence and Facilitating Condition has been adopted in this study. Using questionnaire instruments, 149 data from banking respondents in five states have been collected and analyzed. Of the four key determinants, only Effort Expectancy shows an insignificant relationship with the behavioral intention to adopt blockchain technology. the research should be tested with more rigor and with more variables and in other contexts also.

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K Meenakshi and George (2018) highlight one of the initiative that can be taken by banks to attain sustainability to the great extent, BlockChain technology being solution to major problems can be implemented in banking process to eliminate unwanted procedures, intermediaries and to go paperless, which enables bank to provide environmental-friendly service. The absence of a common record is a very costly problem, BlockChain does resolve that challenge. Blockchain adoption to save natural resources. Adoption of BlockChain will definitely be a major change in the banking history because it is like banking without much of paper involvement and time consumption being minimal. The accountability factors will be enhanced such that any fraud committed can be detected immediately and actions can be taken immediately. The cost of maintenance of records and other data will also be reduced to great extent because of digitalization of transaction. Blockchain can do to banks what the internet did to media. customer failing to understand the working of Blockchain will still be dependent on physical banks. Certain banks have taken initiatives to adopt Blockchain technology due to ease of operation and research is being carried out in this field. To conclude that the blockchain will reduce the use of natural resources more work should be done analyse the impact of energy requirements in natural resources.

Popova and Butakova (2019) discuss the use of blockchain technology without tokens to protect information about banking transactions, namely, transfer amounts, card details, names of participants, etc. This topic is relevant, since the digital economy is becoming an integral part of modern life. The article analyzes the protection mechanisms of distributed databases, proposes a solution to the problem of maintaining the uniqueness of information in them based on blockchain technology without tokens and gives recommendations on the introduction of blockchain technology into modern banking systems. The blockchain is a tool which at implementation in the Banking system without mining and tokens will considerably simplify processes of maintenance of integrity and uniqueness of information on bank transactions, and its implementation in the processes of smart contracts will allow to reduce number of participants at commission of some transactions. the practical aspect of the proposed solution could be tested empirically.

Future Challenges: Development and Applications. This technology is still being developed as experts and practitioners are apprehensive to applications in real life.

Regulatory Challenges: Till now, the one block chain applications have received most of the regulatory attention is Bit-coin or virtual currency to be more precise.

Cyber-Security: Much has been told in the past regarding the dangers and risk associated with the cyber security environment.

Self-Regulation: Legal codes, laws and regulations can be coded within the digital framework to facilitate automatic implementation and assist the regulators in their attempt to protect the stakeholders

This technology is still being developed as experts and practitioners are apprehensive to applications in real life. Developers are comprehending the mapping benefits accrued from this technology. The future challenges need to be studied in further detail and a workable framework may be derived.

Seretakis (2017) seeks to disentangle the myths from the realities of the so called distributed ledger technology or blockchain revolution and discuss how the legal regime can act both as an impediment and a catalyst to the widespread adoption of the technology. The bankruptcy of Lehman Brothers was followed by the dry-up of liquidity in financial markets and the simultaneous distress of multiple systemically important financial institutions. In their quest to avert an economic calamity, governments and central banks around the world decided to massively intervene in financial markets and expend vast sums of taxpayer money, in order to bailout failing financial institutions, and stabilize the financial system. Shortly after Lehman’s bankruptcy, in November 2008, Satoshi Nakamoto, whose real identity remains unknown, driven in part by anger over the financial crisis, published a proposal for a peer-to-peer electronic cash system. Despite the hype surrounding distributed ledger technology, regulatory obstacles can act as an impediment to the widespread adoption of the technology in financial markets. Nonetheless, as experimentation with the technology continues and its potential benefits for financial markets are revealed, policymakers are starting to foster the development of the technology. changes to the regulatory regime, which can act as a catalyst for the application of distributed ledger technology to securities markets.

Ma and Guo (2018) propose a new blockchain-based data privacy management framework. All the countries have different strategies and regulations towards the privacy protection of data in financial scenes, such as the General Data Protection Regulation (GDPR) by European Union (EU). The framework consists of three components: a data privacy classification method according to the characteristics of financial data and a new collaborative filtering-based model and a confirmation data disclosure scheme for customer strategies based on the Nudge Theory. and and propose a set of algorithms for this management framework. future work will incorporate the testing of existing secure and scalable blockchain and the designing a layered architecture for financial applications with hybrid blockchain and feature engineering.

Rega and Riccardi (2017) explore the applications of blockchain technology in the banking industry (in particular, the current initiatives and consortia) and some key issues that must be considered in the banking context. Blockchain is celebrated as “the new Internet of Finance” and is poised to transform multiple sectors, especially the financial services. The World Economic Forum estimated that more than 1.4 billion USD have been invested in this technology. this technology could revolutionize 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. several obstacles, as the technical, regulatory, and other problems of blockchain technology but, perhaps, these ones will ultimately be resolved. The write-up of the white paper needs the rigor of a research paper.

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Oh and Shong (2017) suggest reviewing the suitability of the distributed structure of the Blockchain for the automation of financial institution’s business process, rather than applying it to the entire financial system or individual financial institutions. The financial institutions in Korea are in the technology verification stage to introduce Blockchain technology. Since there is an insufficient amount of actual measurement data, case study method was adopted. it was discovered that the distributed characteristic of blockchain cannot be applied when actually developing financial services. Blockchain had a potential to improve the existing information handling process of financial institutions. Actually, financial institutions are introducing blockchain to improve information handling process. Currently, Bitcoin-based blockchain is an open network, in which anybody can register, and all the members can participate in the decision-making.

Yeoh (201), examines the key regulatory challenges impacting blockchain in the EU and the US. This investigation helps to draw attention to the technology underpinning virtual currencies. It also highlights other economic potentials flowing from blockchain advancement. The hands-off approach adopted in the EU and the US to a large extent bodes well for future innovative contributions of blockchain especially in the financial services and related sectors and towards enhanced financial inclusiveness. Laws and regulations could impact how far and how fast the technology could develop. Regulatory approaches would therefore need to cleverly balance against its innovative spirits while recognizing the possibility of the technology unintentionally contributing to systemic risks to the financial system. the blockchain technology needs to adapt as per the evolving regulatory framework.

BLOCKCHAIN AND THE SHARING ECONOMY: PATHS FOR FUTURE RESEARCH

Academic attempts to investigate the potential of blockchain technology in replacing third parties are made (Bogneretal.,2016; Sunetal.,2016) and the success of such attempts is rather limited and primarily focuses on the context of online interaction and transaction transparency (Huckle et al., 2016). Actual connections of the blockchain with the physical world are hardly addressed in the literature so far, particularly with regard to trust. A noteworthy exception is a recent paper by Pazaitis, De Filippi and Kostakis (2017), who approach the issue of ‘‘trusted interactions on top of the trustless blockchain technology” by the introduction of a so-called proof-of-value concept to verify the value of a (human) contribution to a sharing ecosystem.

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Following this promising work, future research should address the design of trusted interfaces to support the successful implementation of blockchain-based sharing platforms – not only for online, but also for off line interactions. Overcoming the trust frontier without the necessity of trusted third parties will be a major challenge for future work and may provide platform operators with a business opportunity. Moreover, to better understand consumers’ perception of blockchain-based platforms, particularly with regard to the formation of trust, future research should address the conceptualization and development of adequate measurement instruments for trust in blockchain-based algorithms. Overall, we call for high degrees of rigor in the specification and discussion of the concept of trust. It is of utmost importance for both theory and practice to clearly understand the concepts, dimensions, and targets of trust to develop meaningful results. To successfully translate the hype around blockchain technology into viable sharing economy applications, both practical and research efforts will be urgently needed.

DISCUSSION AND CONCLUSION

In this write up, we laid the foundation for further research into the study and implementation of the blockchain technology and their integration into the banking sector. For this purpose, this write up can be considered a starting point in various research domains that will eventually analyze the various research points representing different dimensions of blockchain technology and its application and acceptance in the banking sector. For instance, finance researchers could be interested in the changes blockchain cause in the banking sector, economics researchers could further look into the consequences for the entire economy, or necessary policy changes. Digital transformation is increasingly accelerating developments in several economies and industries, similar phenomena are likely to similarly shape other industries.

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We propose a classification scheme for banking practitioners to evaluate their efforts at the interaction between banks and new technology. Managers can gain insights into the shared practices and related outcomes. Considering the number of co-operations, it is understood and instituted as an eligible strategy for promoting innovation. We also found that both parties benefit from the model, and complement each other’s strengths and weaknesses. Technology plays a crucial role and doesn’t remain the silent, lesser partner in co-operations. Thus, alliances are the predominant form of cooperation in our empirical database, and acquisitions and incubations only play minor roles. We can say that the Blockchain is going to bring a serious transformation within the banking sector. A secure distributed database of client information should be developed and shared by the different bank which will help in reducing time, effort and cost in inter-bank transactions. The information on that may be verified and audited at any time. All of the transaction data that is integrated with a Blockchain is verified by miners and consensus rules. In a bid to evolve towards cashless society this is an appropriate time for initiating suitable efforts towards digitizing the Indian rupees through Blockchain technology. In the coming years, Blockchain will evolve as a disruptive force in transforming the Indian banking sector by making banking transaction faster, transparent. We can powerfully advocate that point is ripe for adoption of Blockchain in the Banking Sector.