Towards an interoperability framework for blockchain in the banking sector

Abstract

Banking enterprises globally are considering the adoption and leveraging of the benefits of blockchain technology to enhance their processes. Most of these organisations seek ways to integrate blockchain into incumbent technologies to augment and support such systems. However, incompatibilities between different blockchain systems and extant banking systems mean that these systems cannot communicate as required. This lack of interoperability between heterogeneous blockchain systems and between blockchain systems and other non-blockchain systems is referred to as a lack of blockchain interoperability. An absence of blockchain interoperability is one of the obstacles to the mass adoption of the technology and, consequently, an obstacle to organisations wishing to leverage the technology to provide better, cost-effective and more efficient processes. Therefore, it is crucial for organisations to address blockchain interoperability. However, organisations do not currently have the appropriate tools, methods or frameworks to guide the complex process of implementing blockchain interoperability.

This study is underpinned by the pragmatist philosophical paradigm and employs a design science research approach to address the blockchain interoperability challenge by developing and evaluating a blockchain interoperability framework. This qualitative study solicited data through systematic literature reviews, interviews with blockchain experts and industry webinars. The data were used to formulate an artefact, i.e., the blockchain interoperability framework intended to guide banking organisations during the process of implementing blockchain interoperability. The framework components were conceptualised and organised through a general system theory lens.

Following the design science process, the proposed framework was evaluated through a summative, artificial and ex-post evaluation process, which included demonstrating the applicability of the framework and evaluating its utility and relevance. The applicability of the framework to the banking sector is demonstrated through an illustrative scenario. The scenario was derived from real projects focusing on the integration of real-time gross settlement systems and a blockchain system. Moreover, to evaluate the framework, the study conducted additional interviews with blockchain experts. These interviews were guided by a set of questions based on predefined artefact evaluation criteria.

The main output of the study is the proposed blockchain interoperability framework. The framework includes a high-level architectural component framework, a process flow and a set of guidelines and considerations for organisations. Practitioners and researchers can use the framework components as a reference point to understand and guide the process of implementing blockchain interoperability. The key findings represented in the framework are organised according to general systems theory elements. The findings indicated that the following aspects should be considered to implement blockchain interoperability in the banking sector: legal and regulatory requirements for interoperability, a clear blockchain-focused use case or business case, an understanding of the goal of blockchain in the organisation, a determination of the systems involved, and determining the type of interoperability required for the selected use case. In addition, the organisation needs to consider the data to be shared. This involves identifying the type of data to be shared (normal business data, cryptocurrency or tokenised assets); the data formats, representations and standards, and identifying any inconsistencies in how the data are represented across the systems. Furthermore, the findings show that banking organisations should ensure the selected approach fulfils the required interoperability and enables the exchange of the necessary data while satisfying essential regulatory, security, privacy, and performance requirements.

The study makes several contributions. From a theoretical perspective, the study offers an extended conceptualisation of blockchain interoperability for the banking sector. The study has expanded on the currently limited research on blockchain interoperability and contributes to opening opportunities for further academic research on the topic. Methodologically, the study offers insights on how Peffers’ (2007) design science research methodology, together with the general systems theory, could be utilised to interrogate a nascent topic such as blockchain interoperability and support the development of a blockchain interoperability framework. Practically, practitioners and banking organisations with an interest in enabling blockchain interoperability in their operations can use the developed framework, process flow and guidelines as a point of reference.