Blockchain of the Financial world


Sophisticated smart contracts, smart invoices and middlemen-less transactions in a globally distributed ledger is a reality today. This distributed ledger has a specific nomenclature because of its popular block like schematic representation called Blockchain. This article is written based on the insights given by Shamit Verma and Snigdha Singh, Executive Directors – Technology Division of Morgan Stanley on blockchain in finance services

Blockchain in general

The blockchain is altogether a unique technology and is actively involved in contributing so seamless and transparent bookkeeping and intelligent ledger management. The blockchain is the technology on which the cryptocurrencies run. Many analysists and experts say that blockchain will soon have over 10% involvement in global GDP. This points to fact that financial transactions for the exchange of work or commodities in the near future could also be regulated and actioned through blockchain in finance services. Undoubtedly, Blockchain is the organized financial – technological reform which could harbor a potential surge in the financial sector.

Shamit Verma Executive Director - Technology Division, Morgan Stanley talk about Blockchain in finance Services
Shamit Verma Executive Director – Technology Division, Morgan Stanley Blockchain in finance Services

Blockchain can do wonders

Let’s understand what Blockchain is capable of. Blockchain was designed to handle the continuously growing number of records. Their records are in form of a list called blocks each cryptographically liked to each other. The financial sector generates an enormous amount of data every day and every transaction is crucial. Here the information is fed into the system through various sources like financial statements, income-tax returns, and other internal records.

Let us consider some companies that issue long-term bonds as an investment as an example. There could be millions of transactions taking place and traditional systems. that run on standalone data basses would essentially break down as we know it causing outages.

Blockchain has enough room to handle such huge volumes of collected data while intelligent models and algorithms systematically arrange in the ledger and accessible by every authorized person or system in the network. Now, this could be termed as a huge ledger which is ever-growing in size and has all the records to date. “When Blockchain technology is applied there is no need to have too many participants. The process becomes automated and acceptable to regulators. This effectively reduces cost and companies like insurance will find it more beneficial”, says Shamit.

Blockchain ledger comes to the rescue

As discussed, blockchain is a hyper ledger. This ledger is also called a distributed ledger as it is shared among members of the network as discussed earlier. To perform any sort of updating, all the participants must agree by consensus which makes it transparent and is much like Open Source in flavor. Every record has a cryptographic signature and timestamp. This is to generate trust in the transactions, for example, if ten banks are updating to a single hyper-ledger, they have to make sure that any transaction changes have to be cryptographically correct.

Live Examples of Blockchain in Finance Services

Snigdha Singh, Executive Director - Technology Division, Morgan Stanley talk about Blockchain in finance Services
Snigdha Singh, Executive Director – Technology Division, Morgan Stanley talk about Blockchain in Finance Services

Basically, let’s say you are purchasing something via an online application. Financial transitions are essentially recorded on its payment gateway IP systems and then on the bank records. This implies if you make a transaction of one dollar, the transactions details will appear at almost six different systems that work in the background. Lets look into a more complex example. The foreign exchange (forex) market could be the best pick of the lot. The challenge is the volatility of forex markets. Forex rates are volatile and rapidly change by the minute.  If this system is working on the blockchain, all authorized entities having access to this can see changes in an instant of a second and trade better and make better decisions using front-end applications to buy or sell.

Training systems with Natural Language

Blockchain may look a little complicated than a regular IT Implementation. Enhancements on this technology are a one-time investment that would assist in analysis and cut down the number of participants reducing their effort. Natural language could be a favorable enhancement that blockchain recently adopted.

Natural Language Processing (NLP) is a bundle of cognitive computing and machine learning. These two create a sense of artificially intelligent machines capable of talking back to us, taking decisions (that is under their control) and improving their capabilities while learning them from humans.  While humans learn by repetitive experience, machines need to be instructed and most of the times provided with context to talk back in a meaningful way. Today, a lot is happening in this field with respect to businesses and financial trends are concerned.

Not to outperform us but to ‘assist’ us

Today, Early adaptors have effectively layered this technology over their traditional infrastructure. “To quote an example, if a customer comes back with an issue where his transaction was defaulted or has a query, he can send an email to a concerned email of the company and get it addressed. In the background, it was the NLP based system that was interacting with him in the first place and if the issues are complicated that a higher decision from a human is required, the system would delegate an executive to assist the customer”, says Shamit.

NLP runs on models and its creation is the most challenging part. “Let’s say if we talk about electronics and the word resister or capacitor has a specific meaning and is related to electronics domain. The challenge comes in making the model more understandable. If you consider a totally different domain versus financial term, For Eg: a word like ‘overweight’ might sound negative, but in fact, it is a positive word and sounds the company is doing well in financial terms.” Says Shamit. In some cases, based on intent and training for various domains will have challenges to be overcome. Most of the intent in financial terms is pretty much clear and accepted globally; which makes it quite agile to layer NLP to a financial system run on Blockchain.

Now, this process saves time and simplifies it for the enterprise.  Many major enterprises who interact with millions of customers worldwide have already adopted this and the customer experiences have seen a significant improvement. To quote an example, if a customer reaches out to a customer executive, it would be an AI-based chatbot that reads the emails and conversations, makes sense of it and replies back. The customer wouldn’t know this fact and continues as if he is chatting with a human on the other side.

Some Discreet applications

NLP and blockchain could help create a report card on the financial institutions and enterprises based on their performance by picking up news, keyword search patterns and signatures made by them.

Natural Language processing systems are present in almost all financial services and enterprises are using them already. Early adopters also include banks and there are other firms that deal daily monetary transactions. It is highly likely that every enterprise across the globe will adopt and leverage capabilities of Blockchain in finance NLP and Artificial intelligence to stay on the right growth path.

For more such interesting stories, read more.

To know more, watch Shamit Verma and Snigdha Singh’s , talk on “BLOCKCHAIN AND AI IN FINANCE SERVICES” at EFY Conferences 2018  Video Bundle.



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