aman sharma mini project.pdf

MINI PROJECT REPORT-II
ON
BLOCK
CHAIN ON
FINANCIAL
SERVICES
TOWARDS PARTIAL FULLFILMENT OF MASTERS
OF
BUSINESS ADMINISTRATION
(MBA)
II SEMESTER
ROLL NO.
2107140700005
UNDER GUIDENCE OF SUBMITTED BY
Mr. RAVI GUPTA AMAN SHARMA

DECLARATION
I, ____________________ hereby declare that the
Mini Project Report on BLOCKCHAIN ON FINANCIAL
SERVICES submitted towards MBA certificate is my
original work and this report has not formed the basis
for award of any other degree, associate ship, and
fellowship or any similar title to the best of my
knowledge.
PLACE:- UNNAO SIGNATURE OF STUDENT

CERTIFICATE
This is to certify that Mr. AMAN SHARMA Roll
no.2107140700005, a student of MBA II SEM in Kanpur Institute
of Management Studies, has carried out the Mini Project work
presented in this report “BLOCKCHAIN ON FINANCIAL
SERVICES”for the award of Master of Business Administration
from Dr. A.P.J. Abdul Kalam Technical University, Lucknow for
the academic batch 2021-23 under my guidance.
Mr. RAVI GUPTA

ACKNOWLEDGEMENT
I would like to take this opportunity to express my
profound gratitude and deep regard to my faculty guide
RAVI GUPTA for his exemplary guidance, valuable
feedback and constant encouragement throughout the
duration of the project. His valuable suggestions were of
immense help throughout my project work. His positive
criticism kept me working to make this project in a much
better way. Working under him was an extremely
knowledgeable experience for me.
THANK YOU
AMAN SHARMA

TABLE OF CONTENT
1 Preface
2 Introduction
3 Current state of cyber security
4 Problem Identification
5 Global Network Vulnerable
6 Policy Maker’s
7 Approaches for Addressing the cyber security resource
gab
8 Traditional financial system vs. Decentralized
financial system
9 Common Block chain application in finance
10 Blockchain technology challenging vulnerabilities
11 Blockchain Benefits
12 Recommended Solution
13 Reason to buy blockchain in financial sector
14 SWOT Analysis
15 Technology Implementation
16 Digitization of financial Instrument
17 Conclusion
18 Bibliography

PREFACE
We may be at the dawn of a new revolution. This revolution
started with a new fringe economy on the Internet, an alternative
currency called Bitcoin that was issued and backed not by a
central authority, but by automated consensus among networked
users. Its true uniqueness, however, lay in the fact that it did not
require the users to trust each other. Through algorithmic self-
policing, any malicious attempt to defraud the system would be
rejected. In a precise and technical definition, Bitcoin is digital
cash that is transacted via the Internet in a decentralized trustless
system using a public ledger called the blockchain. It is a new
form of money that combines BitTorrent peer-to-peer file sharing
with public key cryptography. Since its launch in 2009, Bitcoin
has spawned a group of imitators—alternative currencies using
the same general approach but with different optimizations and
tweaks. More important, blockchain technology could become
the seamless embedded economic layer the Web has never had,
serving as the technological underlay for payments, decentralized
exchange, token earning and spending, digital asset invocation
and transfer, and smart contract issuance and execution.

1. INTRODUCTION :
Digital financial services (DFS) hold great promise as a means to
enable financial inclusion and thus help improve people’s lives.
However, cybercrime has become a key concern in developing
and emerging countries’ financial markets and is threatening to
hinder global advances in building more inclusive financial
sectors. Over recent years, financial markets in Sub-Saharan
Africa, the East Asia and Pacific region, Latin America and South
Asia have been affected by a rapid increase in the number of cyber
incidents and data breaches – and particularly affected are those
markets with higher volumes of DFS transactions. While markets
in Asia are recording the highest use rates of mobile banking and
digital payment applications, they are also experiencing the
highest volume of cyberattacks on financial institutions. In 2016,
financial institutions in Bangladesh, Indonesia, Japan, the
Philippines, Taiwan and Viet Nam were targeted in a series of
attacks. In Sub-Saharan Africa and Latin America, cybercrime is
also on the rise, with cyber-criminal communities in these two
regions growing faster than anywhere else. One explanation for
these trends may be the fact that DFS transactions are often
carried out using insecure devices and over transmission lines that
were not designed to protect the security of financial transactions,
which leaves DFS systems and providers more vulnerable.
Furthermore, with developed economies building up their
defences against cyberattacks, cyber criminals seem to be shifting

their attention to easier targets in emerging DFS markets and
exploiting their vulnerabilities.
Falling victim to a scam or experiencing system access errors can
result in financial and psychological harm and will most certainly
affect a customer’s confidence and trust in the financial service.
A significant cause of customer dissatisfaction with DFS provider
services is unplanned system outages. Research on the attitudes
and behaviours of low-income mobile money users shows that
inability to transact due to network or service downtime was rated
as one of the greatest annoyances and resulted in irresponsible
behaviours that put the users at risk of being defrauded. The
negative experiences prove to deter DFS consumers from using
mobile money services more frequently and significantly
decreased the level of trust in providers and the financial system
altogether. Poor people are particularly vulnerable to fraud and
system access errors that can result from a cyber incident. They
are often less aware and educated about social engineering
attacks, they are more likely to use devices and channels that are
not designed to offer the security needed for a financial
transaction and, most importantly, they can least afford to lose
money. Another problem is that in developing countries
customers are often liable for losses associated with a cyber
incident, or they bear the burden of proving that they were the
victim. In 2016 the International Telecommunication Union
(ITU) and CGAP surveyed 5,220 mobile money users from

Ghana, the Philippines and Tanzania. Fraudulent or scam SMSs
had been received by 83% of the Philippine respondents, 56% of
the Ghanaian respondents and 27% of the Tanzanian respondents.
In both the Philippines and Tanzania, 17% of the mobile money
users interviewed reported having lost money to a fraud or a scam,
while 12% of the Ghanaian respondents made the same
admission. Because trust and confidence in financial service
providers (FSPs) and payment systems are key ingredients for
sustained financial inclusion, cyber incidents and their associated
losses can hinder efforts to expand access to financial services.
2. The current state of cyber security in
developing countries financial markets
FSPs and their customers, as well as financial sector regulators
and supervisors, face challenges in adjusting their behaviours,
processes and policies to appropriately address the growing risk
of cybercrime and technological failures. To better understand the
prevalence and causes of these challenges, in 2018 CGAP
conducted a survey of FSPs, DFS providers, financial systems
operators, policymakers and data security experts from
subSaharan Africa. The research showed that policymakers are
aware of the issue. They are working to develop regulatory
frameworks and build their own in-house capacity so that they can
not only effectively guide and supervise the sector but also protect
their own data and systems. FSPs tend to become more sensitive
to the risk of cybercrime only after they have themselves been

targeted. Smaller FSPs tend not to prioritise cyber risks over other
risks as the likelihood of an attack is still considered small.
Broadly speaking, mobile money operators are more prepared and
better equipped to handle cyber risks, especially those operators
that are run by international mobile network operators (MNOs),
which already adhere to the international security standards set by
the telecommunications sector.
The good news is that there is a growing interest among providers
and policymakers to mitigate the sector’s exposure to cyber risks.
However, these groups lack access to specialised and affordable
cyber security support services, and they struggle to source
information on cyber threats and good practices that is timely and
accessible for people without an IT degree. The lack of cyber
security resources is also manifested in local labour markets,
where specialised and experienced IT and data security
professionals are in high demand and are expensive to hire. The
global talent gap in this area is even more pronounced in
developing countries, especially in Africa.
Representatives from both the public and private sectors would
welcome more public-private dialogue and collaboration to
address cyber security risks effectively and comprehensively, for
example with joint efforts on consumer education.

3. PROBLEM IDENTIFICATION
The financial services industry, in developed as well as
developing and emerging economies, has recognised the growing
risks of cybercrime. In recent years, the industry has developed
standards and guidance for FSPs to help them better protect their
networks and their customers. The introduction of multi-factor
authentication and chip cards has significantly reduced the theft
of consumer credentials, and new tools like machine learning and
artificial intelligence are enhancing the industry’s fraud detection
and resolution processes. More and more FSPs are investing in
cyber defences and resilience.
While cyber defences and good online practices are being adopted
in developed countries and by large multinational FSPs, medium-
sized and smaller FSPs, and particularly those operating in
developing countries, remain underprepared. A review of over
700 organisations from across Africa found that the banking
sector lost USD 1.05 trillion as a result of cyberattacks in 2017.

The review reported that 75% of organisations were not
employing security testing techniques, 60% of organisations were
not keeping up to date with cyber security trends and attacks, and
75% of the vulnerabilities identified within organisations
involved missing patches and software package updates. Indeed,
the review states that “Africa’s savings and credit cooperative
organizations, financial cooperatives and microfinance
institutions are the most vulnerable due to weak system
safeguards and protections”
Another study highlights the increase in attacks on mobile
banking systems. In Africa, cybercrime in mobile transactions in
2017 cost the sector USD 140 million, which includes losses from
SIM swaps, social-engineering and insider fraud. The
vulnerabilities are present on both the provider’s and the user’s
side. Mobile money users frequently fall victim to social
engineering attacks due to insufficient awareness and higher
levels of credulity. Also, many mobile money applications lack
basic security controls such as data encryption, making it easy for
criminals to intercept transactions or eavesdrop . CGAP identified
that a consumer’s financial information can be intercepted at
many stages of a mobile money transaction, meaning there are at
least five possible types of attack: (i) eavesdropping by external
hackers; (ii) eavesdropping via fake network base stations; (iii)
exploitation of roaming technology; (iv) insider eavesdropping;
and (v) other threats from malefactors operating inside MNOs and
DFS providers. Other DFS systems have vulnerabilities too.
Point-of-sale (POS) devices, for example, which enable digital
payment and other types of transactions, have been compromised
by malware. Due to the decentralised nature of POS systems,
which are located in manifold individual retail outlets, attacks are

hard to detect and remedy. In developing countries in particular,
POS devices and systems are found to be insufficiently well
monitored and protected.
Small and medium-sized financial institutions, particularly those
in emerging markets, can serve as easy entry points for criminals
to access the global financial system. In several cases, criminals
have exploited the connections between financial institutions by
breaching small banks in order to rob large ones or by taking
advantage of less equipped and protected institutions in
developing markets in order to gain entry to global banking
systems. Frameworks are therefore needed that look beyond
individual institutions and take an ecosystem approach to risk
assessment and management. So far, there is very little guidance
available for assessing vulnerabilities, risks and threats across the
(digital) financial services ecosystem.

4. Global Networks Vulnerable
The truth is that the all global networks especially those that deal
with money transfers are a primary target for cyber criminals who
have reached new heights of technical sophistication and are more
organised than ever before.
These criminals now boast access to vast resources, even
patronage of rogue governments and plenty of motivation to
perpetrate multi-million dollar frauds. To compound the problem
banking industry veterans also point to a culture at banks of
keeping things quiet in case of breaches or thefts if they can help
it. They should be sharing information and undertaking
investigations in a spirit of openness and cooperation so that the
points of vulnerability are identified and corrected.
The Bangladesh heist was the work of confident criminals who
knew their way about the system, avoiding the strongest defences
and targeting the weakest links in the international payments
network.
5. Policymaker’s capacity constraints inhibit
understanding and effective regulation and
supervision of cyber security
Cyber criminals are not just targeting consumers and providers;
central banks and financial sector agencies can also be the target
of attacks. Regulators and supervisors collect and handle
confidential and sensitive information about the sector that can be
of interest to criminals or may be enough of an asset for criminals

to hold them hostage. One example is Bangladesh’s central bank,
which fell victim to a cyber heist in 2016 .
In addition, regulators and supervisors are becoming aware of the
need to develop regulatory frameworks, industry guidance and
supervisory processes to ensure that the financial sector is
implementing the necessary processes and systems to prevent,
detect and effectively manage cyberattacks.
Regulators, whose aim is to ensure the stability of the financial
sector, are being called upon to develop appropriate regulatory
frameworks to respond to the challenges that financial institutions
and their customers face and to strengthen cyber resilience. At
present, law enforcement agencies in developing and emerging
countries are struggling to keep up with changes in technology, a
situation that is allowing a cybercrime-based economy to flourish.
Software that enables encrypted communication and virtual
private networks (VPN)41, on the one hand, can protect activists
and dissidents from oppressive regimes but, on the other, has
allowed cyber criminals to hide from law enforcement.
Encryption makes it more challenging for law enforcement
agencies to identify malicious web traffic and track the
communications of criminal groups. At the same time, criminals
have developed skills and tools to thwart investigators. Law
enforcement agencies have long struggled with a lack of
resources (i.e., funding, skills, equipment and training) to combat
cybercrime, but that is only one of the challenges they face. It is
even more difficult to pursue transnational criminals.

In many developing countries, legislation addressing cybercrime
is inadequate, punishments are insufficient, and the legal
expertise required to prosecute cybercrimes is in short supply.
There are also significant procedural hurdles, including issues of
jurisdiction, challenges in maintaining standards of evidence, and
the difficulty of explaining complex digital crimes to juries.
Criminals are frequently left to operate with impunity for several
reasons; for example, absence of adequate evidencesharing and
extradition treaties between countries and lack of capacity to
investigate cybercrimes, identify or locate offenders, or take
culprits into custody.

6. Approaches for Addressing the cyber
security resource gap
A few governments invest in building public cyber security
support structures for the financial sector
In developing markets, the cyber security efforts led by
governments or public agencies often do not target the
private sector as customers. Due to limited capacity and
resources, national cyber security initiatives tend to focus on
serving public agencies and critical infrastructure - the most
important assets for market stability and integrity. Yet, even

for serving their own agencies and market infrastructure,
capacity and resources are often insufficient to effectively
train and educate public agency staff, recruit technical
experts and provide the support that regulators and
supervisors need.
Common national support structures are computer
emergency response teams (CERTs) or national computer
security incident response teams (CSIRTs) that assist when
an IT or data system has been attacked. In Africa, more and
more governments are setting up such structures, with a few
already up and running. However, the CERTs and CSIRTs
often lack capacity and struggle to keep up with the rapid
changes occurring in the cyber threat landscape, which, in
turn, impacts on the advice and support they can provide to
industry. Only a handful of countries have CERTs that
specialise in responding to financial sector threats and
incidents. It is usually the case that the range of services
provided by these teams is very limited, services are not
available 24/7 and seldom include an emergency response
line. Important service gaps include security operations
centres, industry-wide and regional threat information
sharing, policy advisory services, financial-sector-specific
advisory services, and educational programs for businesses
and individuals.

Financial sector providers and associations are leading
collaborative efforts to enhance their cyber resilience
In most developed countries, and several emerging and
developing countries, private sector players are teaming up to
share threat information and jointly combat financial fraud and
cybercrime. In many cases banking associations have taken the
lead in formalising exchange of cyber threats. Sometimes, only a
few actors will agree to collaborate and set up a partnership, with
other parties then joining over time. Partnerships come in
different forms and they are not always limited to financial sector
actors; they have also included firms from the IT,
telecommunications and intelligence sectors. More recently, there
has also been a sharp increase in the number of cyber security and
financial security companies (so called ‘FinSec’ companies),
often of a smaller size, that see a niche market in providing cyber
security products and services to FSPs and fintech companies.
Another development is the increase in cyber insurance products,
especially among large multinational insurance companies.

Multi-country approaches can help overcome the resource gap
through economies of scale and scope
Two key challenges arise when working to make cyber security
support services available in developing countries. First, these
countries have a limited number of cyber secusecurity
experts,particularly experts that understand cyber threats in the
DFS context. Second, there is a likelihood that the economies of
some developing countries may not generate enough in-country
demand to fully support the business of an affordable cyber
security resource centre. Therefore, an effective solution to the
cyber security resource gap may be the creation of regional cyber
security resource centres that can harness a region’s available
expertise and create a critical mass by serving the demands of
multiple countries. These regional centres can be specialised for
financial services sectors and their related sectors, can serve both
the public and the private sectors, and can act as an impartial
platform for public-private collaboration and exchange, including
the

sharing of threat information. Due to their multi-country set-
up, regional centres will be able to facilitate crossborder
exchange, operate early warning systems, and share regional
trends, threats and good practices with other regions and
global platforms. Another advantage of the regional centres
is the possibility of linking them with cyber security resource
centres in more developed economies, which can provide
backup support, expertise and tools that may not be available
at the regional level. For example, a regional cyber security
centre in West Africa could escalate severe incidents to a
cyber support hub in Europe. Indeed, a number of actors in
Europe and Africa are already working to design and
develop such regional cyber security resource centres.

✓ P2P NETWORK
Peer to peer network, commonly known as P2P is a
decentralized network communications model that consists of
a group of devices (nodes) that collectively store and share files
where each node acts as an individual peer. In this network,
P2P communication is done without any central administration
or server, which means all nodes have equal power and
perform the same tasks.

P2P architecture is suitable for various use cases and can be
categorized into structured, unstructured, and hybrid peer-topeer
networks. The unstructured peer-to-peer networks are formed by
nodes randomly from connection to each other, but they are
inefficient than structured ones. In structured peer-topeer systems,
the nodes are organized, and every node can efficiently search the
network for the desired data. Hybrid models are actually a
combination of P2P and client-server models, and when
compared to the structured and unstructured P2P systems, these
networks tend to present improved overall performance.
COMMUNICATION
Existing communication protocols in security networks are highly
centralized. While this naively makes the controls easier to
physically secure, external actors require fewer resources to
disrupt the system. We present a solution to this problem using a
proof-of-work-based blockchain implementation built on
Multichain. We construct a test bed network containing two types
of data input: visual images and microwave sensor information.
These data types are ubiquitous in perimeter intrusion detection
security systems and allow a realistic representation of a real-
world network architecture. The cameras in this system use an
object detection algorithm to find important targets in the scene.
The raw data from the camera and the outputs from the detection
algorithm are then placed in a transaction on the distributed

ledger. Similarly, microwave data is used to detect relevant events
and are placed in a transaction.
VALIDATION
A Blockchain Validator is someone who is responsible for
verifying transactions within a blockchain. In the Bitcoin
Blockchain, any participant can be a blockchain validator by
running a full-node. However, the primary incentive to run a full
node is that it increases security. Unfortunately, since this is an
intangible incentive, it is not enough to prompt someone to run a
full node. As such, Blockchain Validators comprise primarily of
miners and mining pools that run full nodes. It’s important to note
that “validation” and “consensus” aren’t the same thing. A
Blockchain Validator performs validation by verifying that
transactions are legal (not malicious, double spends etc).
However, Consensus involves determining the ordering of
events in the blockchain – and coming to agreement on that order.
VERIFICATION
Blockchains are made of blocks of code joined together and is
essentially a process based on consensus between transacting
parties. The blockchain network has many nodes of such
continuous blockchains. It functions as a ledger which is
decentralized. Whenever a new block is introduced, the
transaction gets a digital signature fingerprint which cannot be
altered and consists of hashtag functions of the previous block

with an output that is unique. If the output is changed and not
verified the transaction becomes invalid and unverified. This
means that all network nodes should receive the exact same
output on executing the hash. If the change is acceptable by this
test, the transaction is verified.
Blockchains provide security, immutable records, and
verification as the prime features. The different blocks are held
together by connecting hashtags, and each and every block holds
the hash code of the preceding block got from the values
generated when the new block is introduced.
Every initialized transaction has the connecting nodes verify the
following
• Transaction history is immaterial, and the balance of the wallet
address of the sender is checked.
• Receiver address is also verified.

CONFIRMATION
Confirmations are one of the most important aspects in
evaluating both the legitimacy and the security of a given
Blockchain, as a blockchain that requires more confirmations
and can produce more confirmations in a given time interval is
considered more secure and reliable than others. Blockchain
Confirmations allow users to know that their transactions over
blockchain networks have been secured. When a transaction is
made on a Blockchain Network–for instance, when you send a
few coins to your friend’s digital wallet address– that
transaction must be recorded on that blockchain’s digital
immutable public ledger. The digital immutable public ledger
is a sequence consisting of digital blocks attached to each other,
ordered down to the millisecond in a chronological chain,
thereby known as a “Blockchain”. After being placed on the
blockchain, each transaction must be validated through a
process called consensus. Consensus validation is performed
by miners on the network using a Proof of Work scheme that
rewards miners new coins in exchange for securing and
validating transactions, as long as their new blocks are
approved by the other miners on the system through participant
consensus a Blockchain Confirmation is a number of times
another block or transaction is placed chronologically after
your transaction’s block. For example, if your transaction is
placed on one block, it is very likely that a new block will be
appended to your block soon after as more transactions are

made on the network. If a malevolent agent on the network
wishes to reverse or corrupt a transaction, not only will they
have to get through that block’s security by decrypting its
encrypted data, but they will also have to decrypt all of the
other data on the blocks ahead of this block since the blocks are
all linked together in a chain. Blockchain Confirmations
therefore work as a measure of security, since for every block
that is added after your transaction, your transaction is much
less likely to be reversed and is therefore more secure.

A
A
S
d
7. TRADITIONAL FINANCIAL SY
TEM
VS.
DECENTR LIZED FINANCIAL SYSTEM
❖TRADITION L FINANCIAL SYSTEM
The traditional financial systems work on trust An
honest and secure as you may think and expect.
its not as
Traditional, classical or most of the current financial systems
are setup on trust. Trust that organisations that are regulated
will follow regulatory guidance on their processes. Trust that

when you engage with them or buy a financial product from them,
it will serve the purpose it is intended to. Trust that when you
trade against a financial institution, as you would do when they
take the counter party position to a derivatives trade, they will
fulfil the obligation and give you the money they owe you. Trust
that they will not misuse your information to their advantage and
deal with you fairly.
How well deserved do you think is this trust, that is placed
in the system by the people?
So what exactly would be a solution to this
Two things: self-sovereignty and immutable transparency
These are the two things that the new blockchain and
cryptocurrency-based revolution can deliver to you. Let's explore
one concept at a time.
Self-sovereignty:-
Self-sovereignty implies that you are in total control of all things
related to you and that you do not rely on anyone else for anything
that you may need. Self-sovereignty in financial terms means you
are in full control of your money, what happens with your money,
how you invest it or just hold it and no one else can have access
to your money without your explicit permission. Today this is
extremely easy to achieve if you hold your "money" in
cryptocurrencies, digital assets, stablecoins or even tokenized
securities. No need for a bank. You carry it on you or put it in a

safe place for when you need it. It’s your call. It’s your privilege
and responsibility.
Immutable transparency:-
Well today there are a myriad of options to invest your
cryptocurrencies and stable-coins in decentralized platforms that
let you earn an interest on your holdings, or borrow against, or put
it up for creating pooled funds that are further used to provide
liquidity to other financial functions such as mortgages or
financial products, or participate in decentralized "defi"
derivatives, etc.
At the center of every traditional financial system are money and
its consequential trade. The primary goal of an economic system
is the exchange of goods and services through trade. A financial
system comprises financial institutions such as banks, tradable
assets such as money, and financial services such as stock
brokerage.
The traditional financial industry has evolved from handing gold,
silver, and paper currencies to trying out digital transfers from
credit and debit cards. In all this time, one thing has remained
constant, its rigid centralization system for handling money. This
need for intermediaries is not only costing us a good penny but
has also proven to be a lengthy process to deal with.
Needless to say, we need to keep an eye on emerging
technologies, like blockchain, to discover more effective ways to
manage our finances. Technology continues to evolve and

develop new management systems to fix the previous system’s
weaknesses. Therefore, it’s imperative to look into the discoveries
and not wait for a decade to pass before we make a move.
DECENTRALIZED FINANCIAL SYSTEM
Decentralized finance (DeFi) is an emerging industry that
promises to revolutionize the traditional finance sector. The need
for an open, transparent, and secure financial system is the key
driver behind the decentralized finance vs. traditional finance
debate, so it does not come as a surprise that decentralized finance
is slowly emerging as an alternative to today’s financial system.
Decentralized finance, which is a block chain-based concept, has
the potential to disrupt traditional finance because of its ability to
be a financial tool that is outside of government and regulatory
control. The creation of completely decentralized and
independent financial systems has since continued to gather pace
amidst growing calls for data and privacy security.
At its simplest, decentralized finance is an open financial sector
that runs on software built on top of a public block chain. It
involves the building of financial products and servic s on top of
a blockchain with the aim of promoting or enhancing the
development of an o pen financial system.
DeFi seeks to revolutionize the financial sector by acting as an
alternative to centr ally-governed institutions, such as banks, that

have historically acted as financial intermediaries.DeFi leverages
a set of progressive, agile tools to give control to users. The fact
that the new trend offers extra fun ctionality in addition to
reducing operational risks makes it an ideal replacement to the c
urrent financial system.
Moreover, having a large number of nodes provides a high
guarantee against hacking and increases network security. Indeed,
to hack the Blockchain and take control of the validation or
modification into a block (and the transactions associated with it),
it is necessary to hold 51% of the computing power contained in
the Blockchain’s blocks.
Thus, the more decentralized the Blockchain is, the more nodes
and computing power there are, which mechanically reduces the
possibility of attack to 51% and at the same time increases the
security of the Blockchain.

To demonstrate the great advantage of decentralization over
centralization in terms of security, let us start with the study of a
centralized database: when a large group of data is stored on a
central server, a hacker who accesses to the server can collect a
large number of data at a time. This would have disastrous
consequences, both for consumers who would see their
confidential data revealed to everyone, and for the company who
control this server in terms of image.
Example: If a bank’s server is hacked, thousands of customers
can be victims of identity theft and fraud. As a result, institutions
that use centralized servers to protect large amounts of valuable
data can spend huge amounts of money to ensure their security.
However, in a Blockchain-based network, more than half of the
computing power should be held to control the validation of
future blocks. Indeed, the main Blockchains (namely the Bitcoin
and Ethereum Blockchains) are very decentralized because they
have a very large number of nodes and a great computing power,
which makingn them totally impermeable to attack attempts by
51%. The risk of piracy is close to zero, which at the same time
increases user confidence.

8. What Are Some Common Blockchain
Applications in Finance?
It’s easy to see how blockchain’s properties make it ideal for
financial applications. Blockchain facilitates safe, easy
transactions, and builds trust between trading partners. It can even
be used to quickly identify individuals through digital IDs.
Banks and other financial institutions are already using
blockchain to optimize their services, cut back on fraud and
reduce fees for customers. Here are five blockchain financial
services use cases gaining traction in the industry:
1. Cross-border transactions : Transferring money across
borders has traditionally been slow and expensive, since
systems typically pass through multiple banks on the way to the
payment’s final destination. When used for cross-border

transactions, blockchain can make the process faster, more
accurate, and less expensive.
2. Trade finance platforms : Trade finance is another blockchain
application in finance to watch. Many banks are using
blockchain trade finance platforms to create smart contracts
between participants, increasing efficiency and transparency,
and opening up new revenue opportunities.
3. Clearing and settlements : The accurate recording capabilities
of blockchain may one day make current clearing and
settlement procedures redundant, resulting in faster transactions
and reduced costs for financial institutions.
4. Digital identity verification : Blockchain is enabling banks
and other financial institutions to identify individuals using
blockchain-enabled IDs. When customer identifying
information is secured using blockchain, banks can increase
public trust while protecting against fraud and speeding up the
verification process significantly.
5. Credit reporting : Credit reports dramatically impact
customers’ financial lives. Blockchain-based credit reporting is
more secure than traditional server-based reporting, as
demonstrated by recent data breaches. Blockchain may also
enable companies to take non-traditional factors into account
when calculating credit scores.

9. Blockchain Technology Challenging
Vulnerabilities
The high level of security offered by a distributed ledger system
offers benefits to establishing a secure data network. Business
offering services in consumer products and services adopt
blockchain technology to secure record consumer’s data. As
Blockchain is one of the major technological breakthroughs of
this century, it is allowing to remain competitive without
requiring the trust of anyone third party.
The technology is evolving new opportunities to disrupt business
services and solutions for consumers. In the future, this
technology will emerge with evolving global services in various
sectors as the front-runner.
Offers Encryption and Validation
Blockchain technology is proficient enough to manage everything
so that data has not been altered i n any way.
Blockchain is encrypted by nature that makes it possible to
provide proper validation.
Apart from that business model can save a cr yptographic

signature of a data or huge form of data on a Bloc kchain. This
would allow users to remain to ensure that the data is
safe. Blockchain is used in distributed storage soft ware where
huge data is broke n down into chunks. This is available in
encrypted data across a network in a way that means all data is
secure.
Unfeasible to Attack
Talking about blockchain it is unfeasibly hard to hack or attack.
Blockchain is decentralized, encrypted, and cross-checked

which m
allows the data to ain strongly backed. As
re blockc
loaded with nodes and to hack most of the nodes co
it is impossible.
Being one of distributed ledger technology
h
ain is fully
ncurrently
it’s most
fundamental attributes are data immutable. It offers a whole new
level of succeeding security where any action or transaction
cannot be altered or counterfeit. This technology valid every
transaction to get the confirmation by multiple nodes on the
networ k.
10. BLOCKCHAIN BENEFITS
(1) Reduced intermediation costs:-
Since blockchains enable impartial transaction execution without
a designated intermediary, they can achieve major reductions in
intermediation costs and faster execution of transactions. Taking
advantage of this feature enables cheaper and faster international
remittances, and small-value transactions (micropayments) that

would not be worth the commission costs when using
conventional methods.
(2) Greater transaction impartiality and efficiency:-
Blockchains leave the transaction details as an unfalsifiable
record, improving transaction reliability. Blockchains can also be
used with technologies called smart contracts and multisig to
enable contract procedures involving multiple stakeholders to be
processed impartially according to the transaction status.
Smart contracts record the execution conditions in the transaction
details, and multisig adds multiple electronic signatures to the
transaction details. This feature enables more impartial and
efficient processing of trade finance and syndicate loan operations
that are conventionally done manually on the basis of contract
documents.
(3) Improved transaction transparency:-
Since unfalsifiable transaction records are shared openly, this
leads to the prevention of improper transactions and the
improvement of market transparency. In addition, using
blockchains as an information-sharing platform among a
company's multiple sites, group companies, or industry bodies,
leads to the speeding up of information-sharing and the
prevention of discrepancies. Taking advantage of this feature
enables the reduction of audit costs, the monitoring of improper
transactions, and the rapid sharing of know your customer (KYC),

anti-money laundering (AML), and customer identification
program (CIP) information.
11. Recommended solution for the
challenges faced by the finance industry
The finance industry has been facing many challenges for a very
long time. The incredible advancements in technology have led to
solving numerous problems, but some new technologies have
created new issues in the process. There are multiple fintech
solutions available today, making it very confusing for financial
service providers to decide which solution will suit

them best. Hence, they look for an all-in-one solution that can
help solve all of the major challenges being faced.
Blockchain in financial services is highly promising and can solve
significant challenges faced by the industry.
❖Security and Transparency
Financial services all across the globe are still centralized and
multi-layered. Financial data is mostly stored in centralized
databases, and it has to go through multiple intermediaries
such as the front office, back office, etc. There is a severe lack
of transparency in the system, with the safety of the data being
solely dependent on the intermediaries and database security.

Even if the databases have maximum protection, there are still
very high chances of data breaches and servers’ hacking. The
lack of transparency in the system fosters security threats as
nobody can know what is happening until things go wrong or
data gets breached. Though understandably, everyone does not
want their financial records to be transparent, having a certain
degree of transparency in the system is beneficial and essential
for both financial service providers and their clients.
Solution:- With blockchain in financial services,
transparency and security can be ensured simultaneously.
Immutability: As blockchain is immutable, no data can be altered. It
ensures that all data is secure, authentic and correct.

Privacy:There are two security keys – a public key and a private
key. The public key is available to all users in the network. The
private key, however, is only shared between the stakeholders of
the transaction. Hence, the transaction will be visible to all users
in the network with the public key’s help, whereas the
stakeholders’ and transaction details will only be visible to those
who have the private key. It ensures that transparency is
maintained in the system while securing the confidential
financial information of the stakeholders.

Zero-Knowledge Proof Technology: Several blockchain
networks support the zeroknowledge proof technology as a privacy
solution for their blockchains. It allows verification of the financial
data without disclosure.
Reduced Costs
Given that the financial sector is mostly centralized, it invests a lot
of money in:
purchasing central databases
bookkeeping
maintenance of databases
labor costs
security of databases
intermediaries’ commissions

value transfer systems
These costs are recurring, which means money has to be invested
in them at regular time intervals. All these additional costs make
the system more expensive without the guarantee that data
breaches won’t occur.
Solution:- With blockchain in finance, many costs can be
reduced.According to a study,DLT can reduce the cost of
financial services infrastructure up to USD 15 Billion – USD
20 Billion per annum by 2022. Blockchain technology is a

formof DLT, which can help increase transparency and
reduce costs while ensuring security. Financial service
providers like banks can also implement smart contracts in
systems to reduce the costs of: their
• intermediaries
• value transfers bookkeeping.

12. Reason to buy Blockchain in
Banking and Financial Services Market
Report
1. Breakdown of the sales data at the country level, with sales,
revenue and market share for key countries in the world, from
2014 to 2014.
2. The Blockchain in Banking and Financial Services competitive
situation, sales, revenue, and global market share of top
manufacturers are analyzed emphatically by landscape contrast.
3. Describe Blockchain in Banking and Financial Services
distributors, customers, research findings and conclusion,
appendix, and data source.
4. The details of the competitive landscape outlined in this report
are likely to provide an analysis of the prominent industry
vendors, their growth profiles, strategies, and tactics, etc., that
would help investors in decision-making.
5. To project the size of Blockchain in Banking and Financial
Services submarkets, with respect to key regions (along with
their respective key countries).
6. To strategically profile the key players and comprehensively
analyze their growth strategies.
7. Focuses on the key global players, to define, d scribee and

analyze the value, market share, market competition landscape,
SWOT analysis and development plans in the next few years.
13. SWOT ANALYSIS OF BLOCKCHAIN IN
FINANCE

14. TECHNOLOGY IMPLEMENTATION
Money transfers:-
Transferring money to other countries presents many problems
and challenges for consumers and financial institutions. People
send billions of dollars internationally each year, and the process
is usually expensive, laborious, and error prone.
Blockchain can change all that. Many major banks have adopted
international payments with blockchain technology, which saves
time and money. Consumers can also use blockchain money
transfers to complete electronic transfers with mobile devices,
avoiding the cumbersome process of visiting a money transfer
facility, standing in line, and paying fees for a transaction.
Inexpensive, direct payments:-
Most funds move through financial institutions, such as banks or
credit card processing centres. Each of these steps adds a layer of
complexity, along with fees that can become costly.
The benefits of blockchain-based transfers for merchants include:
• Reduced fees: When customers pay with a credit card,
merchants pay processing fees that cut into profit.
Blockchain payments reduce or eliminate fees by
streamlining the transfer process.

• Eliminated insufficient funds: Consumers sometimes pay for
goods or services with a bad cheque, which causes a loss and
additional fees for merchants, as well as the possibility of a
legal hassle to recover. Blockchain-based payments can give
merchants the confidence of knowing that the transaction is
good within a few seconds or minutes.
The benefits of blockchain-based transfers for individuals
include:
• Fewer scams: Online scams are a concern for many
individuals, but blockchain-based payments are quick and
reversible. They’re also less expensive than using banking
services, especially for pricey items.
• Less time and money: The safest payment methods are
cash, wire transfers, and cashier’s cheques, but cash is
untraceable, wire transfers are time-consuming, and
cashier’s cheques can be forged. With blockchain-based
payments, all of these issues are removed for greater
confidence.
Transaction details:-
Money transfers aren’t the only way blockchain can revolutionise
banking. Blockchain is an excellent method of tracking
transactions and ensuring accurate, secure information, such as:

• Title details: A distributed ledger is nearly impossible to
alter, making it easier to track ownership. Transfers of
ownership and liens can refer to the ledger to verify the
information, so there’s more trust.
• Smart contracts: Transactions can be costly, complex, and
time-consuming, but blockchain offers an opportunity for
automation. Smart contracts can track when a buyer pays
and when the seller delivers, as well as address any problems
that come up during the process. Automated systems also
reduce human error and work 24/7.
Financial inclusion:-
Blockchain’s low costs give startups a chance to compete with
major banks, promoting financial inclusion. Many people are
looking for an alternative to banks because of restrictions like
minimum balance requirements, low access, and banking fees.
Blockchain can provide an alternative that uses digital
identification and mobile devices, free from the hassle of
traditional banking.
Reduced fraud:-
Blockchain stores information in a ledger with transaction
information within each block, along with a unique hash that
refers to the previous block. Every person within the network

receives a copy of the transactions as well. Because of these
features, blockchain technology is resistant to distributed denial-
of-service attacks, hackers, and other types of fraud.
Without the threat of cyber attacks, the expense of conducting
business is reduced, helping all parties involved save money and
stress.
Crypto currency:-
Digital currencies are the new wave of assets that rely on
blockchain. Though digital currency is already in use, blockchain
companies are lowering the barrier of entry and providing a
seamless exchange of the most popular cryptocurrencies as a
banking alternative.

15. Digitizatio
The digitization of
assets, smart contra
benefits of blockchai
of connectivity an
m ents
sing digital
– takes the
ented levels
products,
n of Financial Instru
financial instruments – compri
cts and programmable money
n further by forging unpreced
d programmability between
holdings. These digitized instr

redefine the processes of commercial and financi al markets,
creating a new paradigm where value is brought at every
touch point.
Digital financial ins
benefits:
truments offer the followin g business
Authenticity and scarcity: Digitization ensures data
integrity, and enables asset provenance and full transaction
history in a single shared source of truth
Programmable capabilities: Code that addresses
governance, compliance, data privacy, identity (KYC/AML
attributes), system incentives and features that manage
stakeholder participation (for voting and other rights)— can
be built into the assets themselves

Streamlined processes: Heightened automation increases
overall operational efficiency. It enables real-time
settlement, audit and reporting; and it reduces processing
times, the potential for error and delay, and the number of
steps and intermediaries required to achieve the same levels
of confidence in traditional processes
Economic benefits: Automated, more efficient processes
trigger reduced infrastructure costs, operation costs, and
transaction costs
Market reactivity: Digital securities allow greater
customization than standardized securities, and can be
issued within shorter timeframes. Issuers can create bespoke
digital financial instruments directly matched to investor
demand.

CONCLUSION
Banking services are moving to digital at an ever-faster rate and,
in developing economies, are increasingly being used by low-
income and low-literacy users. However, concurrent with this
progress, sector actors are facing a growing risk from cyber
criminals seeking to attack their systems and consumers. If the
sector is to continue building and maintaining consumers’ trust
and confidence in financial systems, it needs to build its defences
and ability to respond and recover from potential attacks.
Protecting the financial sector and securing global advances in
financial inclusion not only depends on FSPs improving the
security of their own systems, but also requires a system-wide
approach to security. Governments and providers need to
collaborate within their jurisdictions as well as with peers around
the world to exchange intelligence and support each other in
fighting cyber criminals. Actors with more capacity will need to
provide their weaker peers with support, because doing so will
provide benefits in terms of reciprocity and will help safeguard
these actors’ own systems and the public’s confidence in the
sector.

BIBLIOGRAPHY
• Fin Tech evolution(2018): strategic value management issues in
a fast changing industry. Strategic Change-
Briefings in Entrepreneurial Finance 27(4):301–311
• Footprints on a Blockchain(2017): trading and information
leakage in distributed ledgers. J Trading 12(3):5–13
• perspective - a comparative study of Citibank and
ICBC. Financial Innovation 3(1):12
• Blockchains and smart contracts for the internet of
things(2016):2292–2303
services(2016). J Corp Account Finance 27(5):53–57
• financial fraud in public sector services.(2017) Bus Inf
Syst Eng 59(6):441–456
The transition from traditional banking to mobile
internet finance(2017): an organizational innovation
Cryptocurrencies and business ethics(2018). J Bus
Ethics 152(1):1–14
Blockchain and its coming impact on financial
A Blockchain-based approach towards overcoming
Distributed ledger and Blockchain technology:
framework and use cases.(2018) J Invest Manage

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