When blockchain permeates into APAC’s banks, the tie-up is promising

Fintech is taking over the world. Blockchain, to be precise. More aggressive than the betting websites.  Better celebrated over the cryptocurrency craze. It’s a big leap forward advancing the banking industry and the government. It vastly spans across Southeast Asia to expedite the empowerment of the blockchain: the first consortium of banks in Southeast Asia in collaboration with a government agency to apply blockchain technology in the Know Your Customer (KYC) process.

Singapore-headquartered OCBC Bank, UK-headquartered HSBC Bank and Japan-headquartered Mitsubishi UFJ Financial Group (MUFG), together with one of Singapore’s government agencies, the Infocomm Media Development Authority (IMDA), have completed the proof-of-concept (POC) for Southeast Asia’s first KYC blockchain.

In banking, KYC is indeed crucial but time-consuming when done manually. It can take weeks to complete the process: customers submitting a set of supporting identification documents, having those physical copies validated used up laborious efforts and resources. And this is where the KYC blockchain comes into place. The blockchain, trusted by professionals and now, more and more industries worldwide, but especially in Asia, as a digitized, decentralized, and public ledger of all transactions, offers the desired security and confidentiality plus the convenience of trackable record-keeping. The KYC blockchain, running on a Distributed Ledger Technology (DLT), offers the ultimate accuracy and efficiency. With the individuals’ consent, information will be recorded, accessed, and shared across the network using advanced cryptography, which then allows the banks to collect and validate with strict security, speeding up the process and saving much human efforts. Yet more is to come. The ease in the process isn’t the only benefit that blockchain can deliver. When we talk about banking, of course there’s auditing and regulatory report to deal with. And faultlessly KYC blockchain brings promising results as the customers’ encrypted information can easily be validated by checking against government registries, tax authorities, and credit bureaus. Then banks can simply share the digital records across a distributed network to streamline the process, not only lower compliance cost but most importantly, such an advancement can in turn help banks combat anti-money laundering (AML) and the financing of terrorism (CFT).

So why did the banks choose to turn to Fintech now? Blockchain isn’t a new topic to the industry but this specific time? Yes, at the time when the global financial crisis struck and many international businesses chose to downsize or exit Asia-Pacific (APAC), banks in Asia chose to collaborate with Fintech startups which have been growing more ambitious to challenge the banks’ success. Instead of competing against them, the banks out-smarted fellow global players to establish a new strategic focus: embrace cutting-edge technologies, take the lead to experiment, and gain from innovation. Auspiciously the POC prototype has turned out to be a success. Other than practically streamlining the KYC process, it positively contributes in building goodwill for the brand. Consider this: when fighting financial crime, people believe banks play a major role, and it’s true. Imagine the destructive impact on the public and the community—threatened livelihood, company closure, individuals’ bankruptcy… and it brings the halo around the bank’s name if it takes the initiatives to fight against such a catastrophic crime, also in a way to help a startup by collaborating.

Back to the POC prototype’s testing performance, carried out within just 4 months, it has shown assuring results on its functionality, scalability, and security. Even facing a high volume of information flow, it remained stable, and what’s encouraging is, it was resistant to being tampered by third parties to maintain its confidentiality by permitting access only with legitimate authentication. This is exactly what blockchain promises. And it’s been proved genuine.

Hence, for industries to develop the competitive advantages via Fintech seems the right direction to hit, also for the fact that demand to advance blockchain technologies with a collaborative effort seems to be on the rise.  Corporates, governments, SMEs, startups, all are determined to transform businesses into cost-effective and value-added experiences that are beneficial to the different parties involved. The right target has been set. A more innovative attempt is about to revolutionize yet another new era.

About Asia Blockchain Review

Asia Blockchain Review is the largest initiative for media and community building in Asia for blockchain technology. It aims to connect all blockchain enthusiasts on a regional scale and facilitate the technological foundation of blockchain through a range of group discussions, technical workshops, conferences, and consulting programs.

Our goal is to cultivate and encourage a collaborative community for our members to gather, share their experiences and endeavors in the blockchain space, and brainstorm the potential uses of blockchain technology.

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