YES BANK unlocks blockchain to champion vendor financing

Now customers and their clients can be in one platform and access real-time information on financing, improving process speed and productivity.

YES BANK, India’s fourth largest private sector bank, decided to take the plunge into the blockchain trend in early 2017, marking the beginning of a revolution not only in the country’s supply chain and financing landscape, but also in its ever evolving banking industry. Launched in January 2017, YES BANK’s multi-nodal blockchain services suite aimed to fully digitise the business processes—from payments to invoices—of Bajaj Electricals Limited, a consumer electrical equipment manufacturer based in Mumbai, India. 

But in the process of launching the service for Bajaj Electricals, YES BANK also opened a treasure trove of possibilities for the whole of India’s banking and finance industry—that the time for blockchain to improve transactions, processes, and economic prospects of players in the vendor and supply chain financing sector is now.

Following the official launch of the bank’s blockchain services, YES BANK’s managing director and chief executive officer Rana Kapoor noted that a central focus on innovation has and will always remain a part of the bank’s DNA to serve its clients better. “Since inception, YES BANK has used technology and innovation, as mission critical pillars, to offer a superior banking experience to its corporate and retail customers. Our blockchain implementation is a continuation of this philosophy to offer revolutionary banking technology to our clients,” he said. “I strongly believe that we are only at the tip of the iceberg.”

Revolutionary step
YES BANK’s current blockchain services suite for Bajaj Electricals Limited offers a list of comprehensive innovative solutions, with a focus on leveraging the technology to improve services—an industry first in India’s competitive banking industry.

The solution uses and leverages the Hyperledger Fabric supported by IBM to design a vendor financing solution, which allows Bajaj Electricals to digitise the process for discounting and disbursal of funds to its vendors by integrating seamlessly with the bank’s systems. It will also facilitate an automated debit from Bajaj Electricals’ account by YES BANK, whilst the business logic and rules are captured in a blockchain-based smart contract (Chain Code), implemented in partnership with fintech startup Cateina Technologies.

For Anup Purohit, YES BANK’s chief information officer, the decision to take a deep dive in blockchain for vendor financing is simple: make the process better and more convenient for clients. “The to and fro of invoices, paperwork, and the subsequent paper trail was a time consuming process involving rigorous due diligence and needed innovative intervention,” he explained, noting that all stakeholders involved enjoyed being part of the same platform and access to real-time information, whilst at the same time increasing productivity for all.

Purohit said that since the technology’s implementation, transaction time for Bajaj Electricals and its clients have been reduced from almost 4 days to near real-time. But the list of benefits doesn’t end there. “The application of blockchain developed by YES BANK benefits by making information readily available and accessible to all parties online, secure and tamper-proof mode of transactions, and an entirely transparent process whilst maintaining a secure audit trail owing to the nature of blockchain technology,” he said.

But the journey to launch YES BANK’s blockchain services—first for Bajaj Electrical and then a commercial launch in March 2018—was anything but straightforward. This is despite YES BANK’s unwavering commitment to be at forefront of innovative banking, particularly for blockchain. The bank’s CIO explained that it was an arduous process of brainstorming, trying, and learning about how to implement the best blockchain solution for its client and gaining support for the endeavour.

Purohit explained that one of the key learnings has been accepting the model of collaboration over ownership. Collaboration and creating an open environment for innovative developments ensured the development of new technologies like blockchain application, which help institutions like YES BANK offer better solutions to clients, improve business operations, and strengthen banking relations, he said.

“One of the challenges was to find a client who would truly partner us in spirit; be willing to mobilise teams to test the process and help us in quick implementation,” he noted. “We found our match in Bajaj Electricals and the process is a success today.”

The biggest win in this success story, however, is how this could pave the way for more implementation of blockchain technology within the sector and across various sectors in India—and even across countries in the Asia Pacific region. 

Blockchain trend
Blockchain has been the hottest item in innovative banking and finance sectors over the last few years. It is a cryptographically secure list of records that is resistant to modification of data. It allows for fast, secure, transparent, permanent, and tamper-proof way of recording a transaction—something that appeals in transactional industries like banking and finance.

Purohit emphasised that these are the benefits of blockchain technology that YES BANK was banking on. “Our interest in blockchain was owing to its potential of ushering an era of efficient processes through transparency, speed, security, and seamless connections in order to maintain records and make quicker transactions,” he explained.

“We wanted to create a blockchain banking solution for our clients, which would have immediate, measurable impact and provide a quantum leap compared to the current process,” Purohit said. This line of thinking and innovative pursuit made them become the first in India’s banking industry to implement a multi-nodal blockchain transaction, fully digitising vendor financing for its client.

This focus on blockchain and other innovative technologies in the banking and financial sectors is growing around the world. Purohit explained that during the process of designing and implementing the blockchain service for Bajaj Electrical, a handful of other banks across the globe are also dipping their toes in the sea of possibilities that the technology can offer for their products and services. And for the bank’s CEO, this is not a surprise.

With the belief that banks are increasingly becoming more like technology companies that are in the business of banking, Kapoor noted that technology will not anymore be an option but part of the DNA of any financial institution wanting to stay in the game. “We envision that blockchain coupled with IBM’s Cognitive solution on Cloud platform will make a significant impact in the global transaction banking space by ensuring that the financial supply chain is more robust, secure, seamlessly connected, and provides a great customer experience,” he said.

Looking forward
With the blockchain technology already in commercial operations since March 2018, Purohit noted that they are now looking to extend the service to other clients and industry consortiums, and explore new use cases on blockchain for know-yourcustomer, bank guarantees, and more.

“YES BANK is planning to scale the supply chain financing solution on blockchain to several other players in manufacturing and other sectors, thereby easing their operations and providing a real-time bill discounting solution,” he said. “Considering that our infrastructure is already in place and the comfort of having a readysolution live on blockchain gives us the confidence to build several more use cases on the blockchain technology either through standalone or consortium-led models, giving us substantial competitive advantage.”

There is also the possibility of creating differentiation through the plug and play model to scale various digital banking solutions through a range of APIs available within the bank, he concluded.