The World Congress of IT states that banks use trade fair to showcase the block chain technology efforts. There are different services and ongoing experiments in the block chain technology.
Developed by the CTBC Block chain lab, the solution’s aimed in simplifying documents processing that are involved in international trade, like insurance policies and bill of lading, via taking advantage of the indelible record of a distributed ledger, which keeps and automates smart contacts.
IT Programs with Bank Efforts in Block Chain Technology
Six of the largest banks have joined in a project to build a new kind of digital cash, which they hope to launch next year to clear and settle financial transactions over the block chain, the tech underpinning bit coin. Credit Suisse, Barclays, HSBC, Canadian Imperial Bank of Commerce, MUFG and State Street teamed up to work on the ‘utility settlement coin’ that was created by the UBS of Switzerland to make the financial markets more efficient.
The move comes as the project changes into a new development phase, wherein the members aim to deepen discussions with central banks and work on tightening up the cyber security and data privacy protections. The Block chain technology is a complex algorithms set, which enables so-called crypto currencies, which include bit coin to be electronically traded and verified over a network of computers that doesn’t have a central ledger.
Now, with information technology qualifications, banks are exploring how they could exploit technology to hasten the back-office settlement systems and free billions in tied up capital supporting the trades in the worldwide markets. The distributed ledger is one of the most innovative technologies around. From minimizing risk to boosting capital efficiency in financial markets, there are several benefits of the project. Paper documents currently are submitted by buyers, sellers, logistic companies, cargo forwarders, banks and insurers that are involved in international should be delivered and verified manually, contributing to high costs and gradual processing times and added forgery risk, inaccurate filings and human error.
The trade financing solution enables organizations, which have established mutual trust in business relations to digitally submit documents using block chain. Nonetheless, the solution still is in the internal testing phase and does not include funds transfers or payments. Also, CTBC Bank gave a glimpse to the retail banking future wherein services and interactions are delivered more and more through digital channels, voice-controlled AI or artificial intelligence assistants and advanced ATM assistants.
The payment application is intended for New Taiwan dollar transactions and credit card reward point payments and also other royalty program schemes. Nevertheless, as transaction records have to be broadcasted and synchronized across a huge number of user nodes on the block chain, every transaction takes around 20 seconds to complete. Compared with conventional block chain-based system, closed-end payment systems have a bit of time lag, which make it less than ideal for brick-and-mortar use.
Block Chain Interest is High
Definitely, banks are interested in block chain. Nonetheless, most banks are still in the early adoption stages, with around three-quarters involved either or in a proof-of-concept, formulating their strategy or just starting to check it out. Despite the progress, the most prevalent use cases that banks are looking to involve intra-bank cross-border transfers receiving relatively less attention. Yet, wherever they hope of deploying the block chain, executives expect a huge range of benefits, which include faster settlement, lower costs, lesser exceptions and errors and new opportunities in revenue.
It Is All About the Network
A global network is integral to help banks use block chain to help transform payments at scale as well as help in reducing risk of failure. The most effective network must have a couple of defining characteristics, such as:
- It should include the defined rights, controls, obligations and standards necessary.
- It should offer efficient and fast onboarding process, which enable banks to ‘plug and play’ to the network for existing and future corridors.
Benefits of Block Chain Technology
1. Trustless exchange and disintermediation. Two parties could make an exchange minus oversight of third party intermediation, reducing strongly or eliminating counter party risk even.
2. High data quality. The block chain data is complete, timely, consistent, accurate and available widely.
3. Reliability, durability and longevity. Because of the decentralize networks, the block chain doesn’t have a central failure point and better able to withstand malicious attacks.
4. Empowered users. Users are in control of all transactions and information.
5. Integrity in process. Users could ensure that transactions would be exactly executed as the protocol commands, removing a trusted third party need.
6. Immutability and transparency. Public block chain changes are viewable publicly by all parties building transparency. Furthermore, all transactions are immutable, which means that they could not be changed or deleted.
7. Faster transactions. Interbank transactions could possibly take days to clear and for final settlement, particularly outside working hours. Block chain transactions could lower transaction times into minutes and processed 24/7.
8. Lesser costs of transaction. By eradicating third party intermediaries and overhead expenses for exchanging assets, block chains could greatly lower transaction fees.
9. Simplification of the ecosystem. With all transactions added to one public ledger, it minimizes complications and clutter of numerous ledgers.
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The aim of the settlement coin, based on a product created by Clearmatics Technologies is to allow financial groups to pay one another or buy securities, like equities and bonds without waiting for traditional money transfers to be accomplished. Instead, they will use digital coins, which are directly convertible to cash at central banks, cutting cost, time and capital needed in post-trade settlement and clearing.
Each of the coins are convertible to different currencies will be stored using block chain or the distributed ledger technology, letting them be swapped quickly for financial securities traded. From the end of next year, the utility settlement coin could be used by banks to pay each other in various currencies. Before the coins can be used to settle securities trades, the securities themselves would have to be transferred to block chain systems, otherwise the reduced capital requirements and speed benefits would be lost.
The Information Technology ecosystem is indeed evolving at lightning speed and the latest technology in banking would streamline banking processes for banks all over the world.
Dhrumit Shukla, Business Development Manager at TatvaSoft
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