Bengaluru: Tata Consultancy Services Ltd (TCS) is throwing its weight behind blockchain and getting ready to launch core banking software based on the underlying technology behind virtual currency Bitcoin.

This will make India’s largest software exporter only the second large company globally to do so. Incidentally, local rival Infosys Ltd launched a blockchain framework for Finacle, its core banking platform, earlier this year.

None of the other large companies, including Swiss banking software provider Temenos Group AG and Germany’s SAP AG, have any blockchain-based software in their core banking platform.

Mumbai-based TCS will launch the new offering called “enterprise platform" to enable transactions between customers of its BaNCS banking platform by the end of October, according to an executive familiar with the development who spoke on condition of anonymity.

TCS did not respond to a email sent on Tuesday seeking comment.

Blockchain technology, in the simplest terms, is a new approach to how databases can be shared by multiple individuals or entities. For example, unlike currently, when banks maintain individual databases, the blockchain will be updated and maintained, not by a single company or government, but by a network of users.

Think of it the way Wikipedia is maintained by Internet users. Since blockchain works on a model of code-breaking and crowdsourcing, the technology decentralizes the way a traditional bank works—blockchain itself verifies a person’s identity or credit risk.

ALSO READ | Understanding bitcoins and blockchain

TCS’s investment in blockchain technology is significant for two main reasons. Firstly, India’s $150 billion outsourcing sector is witnessing anaemic growth.

None of the country’s five largest software technology firms managed double-digit growth last year.

This is because the traditional approach by outsourcing companies of deploying an army of engineers at cheaper locations to complete work for Fortune 1000 companies is coming under pressure, as automation and artificial intelligence-powered (AI-powered) platforms and cloud computing erase the labour arbitrage enjoyed by these firms.

To fight this slowdown, technology firms are trying to make themselves future-ready by aggressively investing in newer technologies such as blockchain, building automation and AI-platforms and stitching partnerships with Microsoft Corp. and Amazon.com Inc., which offer servers or cloud computing services.

Secondly, blockchain technology, though still in a nascent stage, is considered by many as the biggest disruptive technology since the birth of the Internet.

A World Economic Forum report released on 12 August made a bold prediction that 80% of world’s banks could start distributed ledger (shared digital data) projects by next year, thereby bringing blockchain technology at the heart of the global financial system.

“Looking at it (blockchain) purely from a technical perspective, many of the projects currently under way are laying the foundation for new ways of approaching distributed computing inside and outside of banking—doing for the storage and application layer what the Internet did for the communications layer," Martha Bennett and Jost Hoppermann from Forrester Research wrote in a report on blockchain technology in June.

“But it’s early days yet, and it will take time for all of the security, privacy, and scale issues to be addressed that are of particular importance in a banking context. While a careful approach to blockchain remains a wise one for banks today, it’s obvious that they can’t continue to ignore the topic of blockchain any longer," the analysts wrote.

ALSO READ | Blockchain knocks on doors of Indian banks

TCS and Infosys do not disclose the revenue generated from their core banking platforms, although Finacle is estimated to have accounted for less than $300 million of Infosys’s $9.5 billion in revenue last year.

Infosys, under its first non-founder chief executive Vishal Sikka, has been the most aggressive among domestic technology firms in investing in blockchain technology.

It hired executives to revamp Finacle with blockchain technology, sent a few engineers in its IT services arm to Palo Alto-based Blockchain University to understand the technology and even tied up with Innovate Finance, the UK industry body of financial organizations, in an attempt to partner and even invest in some of the start-ups focused on the technology.

But now it appears that TCS, under CEO N. Chandrasekaran, too, is scaling up its investments in blockchain.

The company has a team of over 100 consultants working in the space, according to the executive cited above.

To be sure, blockchain technology can find uses in industries beyond financial services, including healthcare, supply chains and digital rights management, according to boffins at various technology firms.

For this reason, both TCS and Infosys are making investments in blockchain technology and have teams working outside of their core banking products division, to build applications around this disruptive technology.

For now, banks and other financial firms—their customers—are looking at the use of this disruptive technology to cut settlement times and bring down costs tied to international payments.

Blockchain technologies could cut banks’ infrastructural costs by up to $20 billion a year by 2022, estimated Santander InnoVentures, a London-based venture capital firm.

ALSO READ | How blockchains will change the way we do business

“The financial services industry is undergoing a massive attack from fintech start-ups who are looking to disrupt all aspects of banking. Consequently, legacy and traditional institutions are investing in disruptive technologies themselves to prevent themselves from disruption," said Ray Wang, founder of Constellation Research.

In February, Nasdaq-listed Cognizant Technology Solutions Corp. announced that it had entered into a partnership to develop blockchain solutions for secure record-keeping of documents for Japan’s Mizuho Financial Group Inc.

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