Leveraging Blockchain Technology …

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and fraud, to name a few. The system gets even more complicated when the payments

involve different currencies affected by the exchange rates, multiple banking regula-

tions, costly currency conversions, international transfer fees, and other related costs.

However, these limitations can be removed in their entirety and the whole process

can be secured and completed in real-time by incorporating blockchain technology.

Having a reputation of being a universal ledger existing in a distributed network that

is accessible to all the participants, blockchain maintains a complete record of all the

transactions. It keeps them permanent and immutable through a consensus mecha-

nism where all the participating nodes validate the remittances. The whole process

eliminates the need of intermediaries who pose a threat of dilution of security and

data breach and increased costs. The Peer-to-Peer (P2P) Bank transfer mechanism

more or less works in the same way as the clearing and settlement mechanism.

4.5

Credit Reporting

A credit report is a document that conveys data about an individual’s credit history and

includes information relating to the person’s identity, information received by credit

reporting agencies as to the credit standing, and publicly documented information

such as bankruptcy reports. These reports need to be accurate since any mistake, or

falsified information in the report will lead to wrong decisions resulting in heightened

credit risk for the banks dealing with the individual. The amount of decisions a

bank takes in terms of managing its retail credit portfolio is enormous and includes

decisions relating to the acceptance/rejection of loan application, authorizing the

over-limit, actions to be taken for default cases, identifying accounts that would

possibly default, and cross-sell/up-sell strategies. This necessitated automation in the

lending space which considerably reduced manual work in terms of paper work and

the associated costs leading to the advent of Credit Reporting Systems. It includes

credit bureaus, credit reporting companies operating on a commercial basis, and

credit registries. They build a database that store’s information related to the debtors.

Nonetheless, the main threat in Credit reporting Systems, similar to other banking

services, is data leakage. To secure a safe spot for credit reporting in the banking

ecosystem, BCT has to provide the technical foundation for the Credit Reporting

System which will remove the need for credit reporting intermediaries and strengthen

the system by making it immutable through smart contracts. Creating a common

credit report ledger by implementing BCT and including all the approved banks

and financial institutions as participants of the ledger will ensure single version and

accurate information being deciphered among the participants and ensure the safety

of the data. On similar lines, a shared identity management ledger created through the

blockchain system that involves government departments, educational institutions,

banks, and financial institutions as participants will resolve the identification problem

and make this sensitive data immutable as shown in Fig.7. Sophisticated algorithms

attached with the BCT can help bring credibility factors to identity management by

validating the borrower’s unique identity and garner credit information of a particular