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India’s payment corporation NPCI reveals plans for its blockchain platform Vajra

Blockchain

Blockchain digital illuminated shape. data node base concept. 3d render illustration

National Payments Corporation of India (NPCI), the Indian government-backed organization for payments, has been on a roll in 2019. From clocking landmark one billion transactions on UPI (unified payments interface) to announcing international foray to developing payments on blockchain, NPCI seems to be taking no chance of missing the FinTech bus.

According to a report by cryptocurrency-focused portal Cointelegraph, NPCI is working on a blockchain-based platform to make payments safer, secure, faster and more transparent. It further added that the payments corporation is developing a distributed ledger technology (DLT) mechanism to provide a highly secure, tamper-proof database for various payment procedures including UPI.

NPCI, the umbrella organization for retail payments and settlements in the country developed by the banking regulator Reserve Bank of India (RBI), has released a whitepaper on November 19 this year and has named it ‘Vajra’ Platform.

“After an initial assessment, the DLT based system has been designed for automating payment clearing and settlement processes of NPCI products. The platform is named as ‘Vajra Platform’. A permissioned network will be set up so that only the parties who have been approved by the Network Administrator can be a part of the network. Since Vajra is being developed for a payment processing industry, permissionless blockchain systems were not considered,” the research paper stated.

Vajra is a permissioned blockchain-based platform, which means only a registered party under the network administrator can be part of the blockchain network. There will be three types of nodes on the platform.

Clearing House node: Possesses admin rights for this platform and is maintained by NPCI. It will provide a root-authority-signed TLS certificate from the network’s permissions service to Participant nodes.

Notary node: Validates a transaction only if the Aadhar biometric is used for authentication. It will receive transactions only from the Clearing House node.

Participant node:  Represented by the banks. These nodes can post, receive, and view transactions.

Mentioning some of the benefits of using DLT in the payment processing industry, the whitepaper stated that it results in minimal reconciliation of transactions, higher resilience through automation and transparency besides a near real-time clearing and settlement. DLT also helps in minimizing operations and financial risks and provides a legitimate audit trail.

NPCI’s move to build blockchain-based solutions comes in at a time when digital payments are on the rise, thus making such transactions vulnerable to cyberattacks. There have also been reports of a massive spike in online banking frauds lately with fraudsters trying to steal money via UPI, a real-time payment model created by NPCI.

While NPCI claims that UPI is safe and secure and maintains a 2Factor authentication mode, frauds can still happen through attackers sending bogus e-mails seeking sensitive information of the potential victim or through malware designed to extract data from an infected device or the newest form of SIM Cloning, where the PIN and password can be changed.

Talking to media persons at a recent event, Praveena Rai, COO, NPCI, said that the organization is taking all steps to ensure the safety and security of digital payments and is spreading awareness among the users not share personal details under any circumstances or download fake UPI-related apps that could steal personal data in the name of providing banking service.

Security and safety of the payment infrastructure are crucial for NPCI that is also mulling plans to go international and become a global payment network.

Talking about NPCI’s blockchain initiative, Nischal Shetty, Founder of P2P crypto-exchange WazirX said, “ if implemented it will speed up settlement time between banks, eliminate the cases we currently see where money is deducted from your account but does not reach destination and is stuck in between and also ensure more transparency for all the banks involved.”

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