Blockchain technology lets multiple parties to have simultaneous access to a constantly updated digital ledger which cannot be altered. Some of the areas that would see effects with the use of blockchain would be in Clearing and settlement, payments, Trade finance and so on. In the banking sector in Singapore, one of the development using blockchain would be the Cross-Border Payments. By adopting the blockchain technology it brings about more secure, faster, cheaper and more transparent payments.
OCBC Bank has become the first bank in Southeast Asia to use blockchain technology in its local and cross-border payment funds transfer services. OCBC Bank has adopted a blockchain technology allowing local and cross-border inter-bank fund transfers. A payment blockchain solution jointly designed by OCBC Bank and a local banking payment solutions company, BCS Information Systems (BCSIS). With the BCSIS blockchain platform, it allows inter-bank payments between banks in Singapore and overseas without requiring a payment intermediary. As such, typically a cross-border funds transfer between OCBC Bank Singapore and OCBC Malaysia takes up to 1 day now it could be completed in less than 5 minutes. Some of the benefits for OCBC Bank for adopting the payment blockchain solution would be more secure, faster turnaround time, more transparency and lower cost
With the BCSIS blockchain platform the removal of the traditional intermediary transaction platform, there is a visibility of transaction flows between senders and recipients and the transaction can be much more easily tracked
While SCB adopted a cross-border payment services for the corporates in both Singapore and India by using the enterprise Blockchain platform from the FinTech start-up, Ripple. Ripple’s distributed ledger technology (DLT) solution. SCB and Axis Bank (India) uses the RippleNet as a passage through the “$15 billion trade corridor” between Singapore and India. A typical cross-boarder funds transfer would take up to two business day, while with Ripple’s enterprise blockchain solution, making a cross-boarder payment is able to be completed in less than 10 seconds with full transparency of fees and FX. When fully commercialised, businesses will be able to have access and make cross-border payments in real time, at any time of the day without being restricted by cut-off times. In addition, fee & FX transparency along with real-time status updates will provide businesses greater control and certainty on their payments, costs and the use of funds.
Ripple’s blockchain platform reduces the amount of time and money associated with sending payments across the border which provides real-time, business-to-business (B2B) global payments. Also with the Ripple-powered corporate payment service, it allows SCB to offer their customers an enhanced payment experience, and enabling their end-customers to manage their cash flow, costs, and float better
There are many large international corporates with regional treasury hubs in Singapore, these corporates span industries including fast-moving consumer gods (FMCG) and retail. Often these corporates manufacture their product in India before shipping them to Singapore for worldwide distribution. Singapore-India trade corridor is worth $15 billion, with the Ripple-enabled cross-border payment it helps to unlock the corridor on both sides for Standard Chartered and Axis Bank.
With the increase in uses of blockchain technology in banks, it could potentially disrupt the financial industry. Thus, regulatory issues and impacts may arise. Regulators will have to raise the standards in cybersecurity to ensure the safety of data by reviewing the technology risk management guidelines. While the impacts would be fraud reduction, eliminate intermediaries in the payment processing system, keeping up with Know Your Customer (KYC) and having smart contracts. With DLTs organizations that are using the same DLTs would be able to access and share structured information across a distributed network using advanced cryptography, as such other organization do not have to start a KYC process again which reduces the administrative costs. As for smart contracts, with the use of blockchain, codes can be programmed to create contracts between financial organization once a certain set of criteria has been achieved. Two or more parties then can enter their keys to decrypt the contracts.