BC Bank has become the first bank in Southeast Asia to use blockchain technology in its local and cross-border payment funds transfer services. The use of a payment blockchain solution will see increased efficiency, transparency and security as well as lower costs and a better customer experience.
A successful pilot payment transaction between the bank and its subsidiaries, OCBC Malaysia and Bank of Singapore, was conducted on 8 November 2016, using a payment blockchain solution jointly designed by OCBC Bank and local banking payment solutions company BCS Information Systems (BCSIS). With the successful pilot, and after full integration of this payment solution, the BCSIS blockchain platform will allow inter-bank payments between banks in Singapore and overseas without requiring a payment intermediary. In addition, OCBC Bank will extend the use of blockchain technology to other financial products and service applications.
OCBC Bank’s latest fintech innovation initiative supports the Monetary Authority of Singapore’s (MAS) vision of a Smart Financial Centre and a culture of innovation within the financial industry. MAS Managing Director Ravi Menon had shared this vision, which is part of the government’s “Smart Nation” initiative, at the Global Technology Law Conference on 29 June 2015.
The two pilot payment transactions were:
1. A cross-border funds transfer between OCBC Bank Singapore and OCBC Malaysia
2. A local funds transfer between OCBC Bank Singapore and its private banking arm, Bank of Singapore.
Cross-border and local funds transfers using payment blockchain solution
The benefits of using the payment blockchain solution:
(1) Highly secure: The funds transfer data is recorded in the digital ledger which, once encrypted, cannot be modified or tampered with. This keeps the transaction information private and secure, reducing the risk of fraud.
(2) Faster turnaround time: With the removal of the intermediary and the need for manual processing in the traditional payments setting, the funds transfers are directly conducted between the originating bank and receiving bank in a straight-through process which cuts down processing time. For instance, funds transfers between OCBC Singapore and OCBC Malaysia which typically require up to 1 day could be completed in less than 5 minutes.
(3) More transparency: With the removal of the traditional intermediary transaction platform, there is visibility of transaction flows between senders and recipients and the transactions can be much more easily tracked.
(4) Lower cost: The distributed nature of blockchain’s digital ledger removes the need for centralised institutions (intermediaries) and manual processing, which translates to lower cost.
The successful application of blockchain, one of the fastest-growing financial technologies in the financial industry, to payment services is another result of OCBC Bank’s commitment to digital innovation. This follows closely the launch of the bank’s open Application Programming Interface (API) platform in May 2016.
Said Mr Praveen Raina, Senior Vice President, Group Operations & Technology, OCBC Bank: “Blockchain technology is the most transformative technology to date. It is set to revolutionise the financial industry and change the way we work. As such, we are pleased to be the first bank in Southeast Asia to have completed a successful trial for applying this technology to make real-time international payments a reality.
This is a milestone not only for us but for Singapore as Asia’s financial hub as we pave the way to revolutionising the traditional cross-border payments model. We hope this will be a catalyst for more banks to adopt the blockchain technology so that, together, we can achieve efficiency and cost effectiveness while delivering more high-value financial services to our consumers.
“This blockchain initiative continues to build on our culture of innovation at OCBC where we have scored a few firsts: The first bank in Southeast Asia to launch an open Application Programming Interface (API) platform; the first bank in Asia Pacific to enable secure payments via Apple’s Siri and iMessage; and the first bank in Singapore to launch biometric authentication for mobile banking apps, amongst many others.”
Mr Ricky Lim, Managing Director of BCSIS, said: “As a leading provider of immediate payment platforms, we are pleased to partner OCBC Bank in this initiative, as the application of blockchain technology to payments is a natural evolution in the changing digital banking landscape. This blockchain solution will not only enable banks to inter-operate seamlessly across their own network, but also with other banks. We will continue to leverage emerging technologies and work with the banks to create superior payment experiences for customers.”
Said Mr Sopnendu Mohanty, Chief FinTech Officer, Monetary Authority of Singapore (MAS): “MAS and the financial industry have worked hard over the past two years to build a thriving FinTech ecosystem in Singapore. OCBC’s initiative demonstrates the vibrancy of our banks in applying innovative technology to complex business problems like cross-border payments.”
First appeared at Fintechnews Singapore