Page 219 - ITU-T Focus Group Digital Financial Services – Technology, innovation and competition

ITU-T Focus Group Digital Financial Services
Technology, Innovation and Competition

taking a number of records and putting them in a block and then chaining that block to the next block using a
cryptographic signature. While the data (blocks) are stored one after the other in a continuous ledger, they can
only be added when the participants reach a quorum (consensus) over their validity. Each record is time/date
stamped and provided with a unique cryptographic signature, which is designed to ensure the authenticity
and integrity of the ledger. This distributed design eliminates the need for a central authority or intermediary
to process, validate or authenticate transactions and data.

One prominent DLT application has been through the crypto currency Bitcoin, which uses blockchains to be
cheap and fast international remittances, to a large extent bypassing bank and MNO DFS systems, and simply
using MNO bearer infrastructure to facilitate transactions using either feature phones or smart phones.

At a broader, alternate infrastructure level, DLT is being used to create alternate settlement transaction
interfaces, aiming to replace for example the international SWIFT and other local centralized payment switches.
Under development is the Corda DLT, a DLT technology offered by R3, a consortium of more than 70 of the
world biggest financial institutions in research and development of blockchain database usage in the financial
system. Similarly, Fuzzo has developed BitSIM, a thin SIM technology with a Java applet into a secure Bitcoin
mobile wallet. Blockchain technology built into the system reportedly gives regulators real-time access to
253
transactions data for regtech purposes.

18.2 Country examples

India

The Government of India in December 2016 launched BHIM (Bharat Interface for Money), a rebranded version
of UPI (Unified Payment Interface) to minimize what it said was the outsize role in the Indian economy of
magstripe and EMV-based General Purpose Reloadable plastic cards and POS devices, and concomitantly to
remove or reduce the need to connect to card switches such as those from Visa and Mastercard. The BHIM
app is linked to the national Aadhaar biometric identity system. Merchants download the merchant app to
their smartphones, which are in turn connected to a biometric reader. When transacting, customers input their
Aadhaar number in the merchant smartphone, select the bank to be used for payment, and do a biometric
scan to be authenticated. There is no need to carry a phone or Aadhaar card to make a payment. The app
also allows you to scan a QR code. The system also allows merchants to generate their own QR code through
the BHIM app.

While all UPI-connected banks accept BHIM, banks not connected to UPI can receive money through BHIM
through IFSC, a 11-digit code assigned to every bank branch by the RBI. However, BHIM was launched by NPCI,
254
the sole payment infrastructure provider. Concerns have been raised with respect to infrastructure providers
using its dominance to push BHIM, which competes with applications of banks and non-banks.
Kenya

The Kenya Bankers Association formed the Integrated Payments Service Limited, a company that will facilitate
direct transfer of money between banks through their own bank to bank Real Time Interbank Switch. They
indicate that the need arose for banks to bypass Safaricom’s M-PESA, the market leader, for P2P transactions.
Consumers will register their phone number with their bank, indicating a nominated account to be linked
to be used for transactions initiation and notifications purposes. The switch will also maintain the look-up
255
table, provide guidance for processing fees and set up SMS and e-mail notification template preparation for

253 They also indicate that the thin SIM can be used for blockchain-based mobile ID, mobile banking and mobile remittance Java
Apps. See Fuzzo (2015) BitSIM, available at http:// www. bitsim. co/ #what- is- bitsim.
254 There is a Rs. 10,000 per transaction limit, and Rs. 20,000 per day for BHIM. See Airtel (2016) BHIM App Launched by PM Modi,
Explained in 10 Points, available at https:// goo. gl/ jC1ogx
255 Kerich, M (2015) Kenyan Banks Launch Real-Time Interbank Switch in Response To Mobile Money, available at https:// goo. gl/
y28ff6

195