WATCH: Chennai-based blockchain startup Intain wants to help banks and institutions avoid financial meltdowns
In 2008, the world faced a financial meltdown led by the US housing crisis. At the time, the financial industry and several companies had to be bailed out by the US government. The meltdown began due to securitisation of loans. These bad loans were packaged and traded by hedge funds, whose value was linked to the ability of homeowners to pay back their loans.
"When this packaging and repackaging of loans happened, there were one-on-one contracts between financial institutions such as banks and securitisation companies, there was no way one could tell that the value of the security was falling. This is where smart contracts play a major role - in keeping transparency in the financial system," says Siddhartha S, Founder of Intain.
Beginning his career at the confluence of technology and the financial industry in 2001, Siddhartha started out in a joint venture between Deutsche Bank and HCL. He then moved on to HCL for a decade where he headed global delivery for financial services.
During his time there, he was fascinated with emerging technologies like artificial intelligence (AI) and Blockchain. Siddhartha realised if he can combine the efficiency of artificial intelligence (AI) to crunch data with the transparency of Blockchain to manage different actors in a transaction, he would have a powerful idea in the financial industry.
As chance would have it, he met a bunch of investors in the financial industry who backed the idea on paper. Although Siddhartha doesn’t disclose the actual amount, he admits that it was a sizeable one.
In January 2018, he quit his well-paying job and began building Intain out of Chennai.
Watch Siddhartha in conversation with YourStory here:
Intain is built on the open-source Hyperledger fabric and records all securitised contracts. It puts banks and securitisation companies on the same platform. The company took a good one year to ready its technology and currently has a 40-member team.
"Think about us as building an ERP for securitisation where every party knows what they are signing in to and parties can also know if the underlying securitised asset's value is falling. Then, the information ensures that an asset is not traded or sold because all parties will be a part of a transparent block," Siddhartha says. The AI will use all the information available in the banking system to warn the parties if the traded asset can become toxic.
In late 2018, Intain also won a competition at the United Nations for their AI, which could help banks in predicting risks in emerging nations, bagging a prize money slightly less than $100,000. At present, it has signed up with five companies in Asia and will also focus on the US going forward.
According to Grandview Research, the blockchain market is going to be worth $7.59 billion by 2024 from the $1 billion opportunity it is today. Although there is a slew of companies building smart contracts, Intain has no direct competition in India. RecordsKeeper and KrypC are some startups that come close.
So how does Intain work?
Like any blockchain company, Intain puts each transaction of a security traded into a block, so each party knows exactly what is going on. The hedge fund, the bank, the securitisation companies, and the financial rating companies know about the transaction whenever it is traded.
The bank's data of whether the loans are being paid by the borrower is tracked by the ratings agency. In turn, the ratings of each securitised asset is on the block whenever traded, and Intain allows the chain to understand the financial risks involved.
"The premise is stop a financial meltdown with transparency and efficiency," says Siddartha.
The 45-year-old entrepreneur believes that blockchain is a consensus mechanism that can make the world a better place.