Adopt or Disrupt: Banks Take Keen Interest in Blockchain
Thailand’s Siam Commercial Bank (SCB), among the Kingdom’s largest in terms of assets, deposits, and loans, will be the first in Southeast Asia to implement RippleNet’s ‘multi-hop’ feature, allowing it “to settle frictionless payments on behalf of other financial institutions on the network”, according to ripple.com. The website further states that the bank “can settle and payout across the region without exchanging currencies multiple times and adding heavy fees” allowing for “seamless payments”.
Traditionally, cross-border payments require banks to either be connected with one another on a bilateral basis or find intermediary banks in the country they wish to send funds to that can settle the transaction in the beneficiary’s currency. Both scenarios incur high costs and expose the parties involved to exchange rate risk, which can be detrimental to small-to-medium enterprises (SME) and remitters. Moreover, depending on the location, transactions across different countries and correspondent banks can take multiple days to complete.
With ‘multi-hop’, Ripple claims that expensive fees and multiple exchanges of currencies will no longer be necessary as financial institutions will now be able to make payments into ASEAN via SCB, making transactions easier.
Growing Interest in the Financial Industry
The move comes as a reflection of the growing interest in blockchain technology among financial institutions. In September, it was reported that Kasikorn Bank, also one of the largest banks in Thailand, has been included in Visa’s blockchain-based B2B (business-to-business) payment platform, which also aims to simplify cross-border payments.
In Japan, a consortium consisting of 61 banks will be launching ‘MoneyTap’ after securing a license from the Ministry of Finance. ‘MoneyTap’, which uses blockchain to settle transactions, is a smartphone application that will enable customers of the consortium to instantly transfer funds at any time. This comes as an alternative to Japan’s current domestic payment infrastructure which only allows transactions to occur between 8.30 am to 3.30 pm.
On the other hand, while banks are becoming increasingly open to the use of blockchain, crypto banks have emerged as alternatives to traditional banking. In particular, Switzerland-based SEBA Crypto AG, which was founded by former UBS bankers, seeks to lead “in the convergence [between] traditional finance [and] the crypto economy”. Having raised more than 100 million Swiss Francs, SEBA is planning to obtain a banking and securities dealer’s license that permits them to manage both fiat and digital investments.
Though it will take a considerable amount of time before crypto banks can compete with traditional players in the financial market, it is beyond doubt that blockchain has left a mark on the financial industry. The real question is whether the use of blockchain can be considered a proprietary technology that banks will adopt, as done by SCB and other financial institutions, or one that will disrupt banks altogether.
John Mendiola
1. https://ripple.com/insights/siam-commercial-bank-pioneers-ripplenets-multi-hop-feature
2. Ibid
3. Ibid
4. https://www.ft.com/content/1a632afc-c35d-11e8-95b1-d36dfef1b89a
5. https://www.reuters.com/article/us-swiss-seba/swiss-startup-seba-raises-funds-to-build-crypto-bank-idUSKCN1M635O
