Moving money faster a boon for banks

HONG KONG - Amid talk of the impeccable strength of blockchain technology, many banks have pulled off the feat in business transactions, but standardization remains a problem that needs to be tackled, says a banker from Standard Chartered Bank (Hong Kong).

Among all banking services, transaction banking is always thought to be one that could embrace digital transformation most and deploy blockchain to make money move more efficiently.

“A lot of things we do are fundamental pieces, like who owns what money, where and when,” says David W.Y. Koh, managing director and regional head of transaction banking for Greater China and North Asia at Standard Chartered.

He explains that transaction banks normally operate businesses like cash management, as well as trade and security services. Much of their operations are highly dependent on speed, verification, title and reconciliation.

Koh cites the bill of lading — a document used in international trade to ensure that exporters are paid and merchandise delivered to importers. But, when the bill turns into the digital format, doubts follow.

Questions that would arise include: Does the electronic document carry the same legal authority and rights as the physical document? How do both sides in a transaction ensure who would receive the right piece of information?

“That’s where blockchain comes in,” says Koh.

He deems that with its distributed ledger technology, a bank is able to offer customers another alternative to move money faster, almost instantaneously, and allow everybody access to blockchain to track money movements.

Earlier this year, Asia-focused Standard Chartered launched a new business unit — SC Ventures — to help promote fintech innovation within the bank. The new unit also manages investments in fintech companies, such as those in blockchain company Ripple, which developed the third-largest cryptocurrency by market capitalization.

Sensing that Ripple would be one of the aggregators in the blockchain market, Standard Chartered plans to make full use of the advantage and Ripple’s position, says Koh. The lender has decided to use its connection with Ripple to develop its internal fintech innovation to draw market attention.

Besides investment, Standard Chartered teamed up with Alibaba Group Holding’s Ant Financial Services for the online payment operator’s new blockchain cross-boundary remittance solution in June this year. As the core partner bank, Standard Chartered will provide instant foreign exchange rates and liquidity to enable real-time fund transfers between two digital wallets — Alipay HK and GCash in the Philippines.

Although the bank has collaborated on many blockchain-related projects, Koh warns that different standards of blockchain technology in various countries could still be a barrier for banks with international footprints.

“We move things from one market to the other, but how do we make sure that all these different platforms are able to talk with each other?”

Koh suggests that well-established international bodies, like the International Chamber of Commerce and the International Monetary Fund, could take the lead in the standardization process.

“A lot of them will have opinions. Hopefully, they could interact and reach an agreement with the governments concerned. Certainly, the banking system will be entirely aligned to (the standardization made).”