Blockchain Technology for the Mutual Fund Industry

Abstract

Blockchain and other business disruption technologies have created a buzz in the last few years and have become an inevitable discussions topic in the financial circles. It will have game-changing impact on businesses, particularly on the banking and financial services. Consortium or Enterprise Blockchain is the latest technological evolution allowing us to build hybrid blockchains (public and private) using features such as permission restriction and multiple controlling authorities. These hybrid features allow easy yet controlled information sharing between various stakeholders. After getting acceptance in areas such as remittance & supply chain financing, blockchain is now making inroads into sub-sectors such as asset and wealth management. This article demystifies blockchain concepts and demonstrates an implementation for the mutual fund (MF) industry. MF industry is plagued by slow processing. For example, it takes days together to onboarding a new investor, transactions take a date to appear on statements while NAV computations takes hours to compute and show up for registrars to process transactions. We explore how smart contracts can help cut the transaction processing but will blockchain provide high speed and latency necessary? Can investor statements be accessed dynamically? Will distributed information sharing and decentralization system save costs and time for the stakeholders, particularly in client onboarding, NAV dissemination? How can blockchain help in KYC and other compliance related activities? Can MF scheme portfolios and factsheets get constructed automatically and available with real time updates? How can regulators and auditors have easy access to information as and when they want? Finally, we will examine some of the challenges or hurdles that come in way towards the implementation.