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By Lee Kyung-min
A growing number of financial services firms are introducing blockchain-based technology to enhance customer convenience and service quality, which many believe will change the landscape of the industry.
KEB Hana Bank is seeking to boost closer cooperation with ICT firms in a broader move to strengthen its Global Loyalty Network (GLN) digital platform powered by blockchain technology, a new form of record-keeping ledger that cryptographically secures?records?of transactions
The decentralized blockchain-based network enables customers to make digital transactions regardless of their location.
Digitally convertible commodities including points and mileage can be exchanged on the integrated, digital platform network among financial services firms and member stores including retailers and card point management firms.
The move is part of a collective initiative to change or expand the current role of traditional financial services entities whose revenue source largely and heavily rely on net interest margin (NIM) following lending and subsequent interest income.
Another blockchain-powered service pursued by KB Financial Group is MONA Chain, a blockchain platform in partial operation at LG Science Park in eastern Seoul.
The joint project between KB and LG CNS, an IT subsidiary of LG Group, is a combination of the new record-keeping technology and artificial intelligence (AI).
The group's bank subsidiary KB Kookmin Bank will process final payment settlement at the park, where "tokens" are used for purchases of goods and services, on the platform.
"The joint project will boost use and management of digital currency as well as digital certification, an essential process for us and LG CNS to establish user confidence required for a stable, long-term business expansion," a KB official said.
LG CNS uses Decentralized Identifiers (DIDs), a globally recognized standard for a new type of identifier for verifiable, "self-sovereign" digital identity.
The system will enable more easy, efficient and effective integration with similar services or programs.
This will boost cooperation between digital services, platform providers and banks in the form of creating and managing digital currencies.
Shinhan Bank has introduced a blockchain-powered loan application program, through which individuals will be able to submit related documents without in-person visits to the bank branches.
Another collaboration among Woori Bank, blockchain tech firm Ripple Labs and Japan's SBI Holdings will help bank customers with easy overseas cash remittance.
Other than payment settlement and cash wiring services provided by banks, Shinhan Card took a step further and obtained a patent for a blockchain-based credit transaction process.
The industry leader is the first company in the world to have obtained the patent for having established a blockchain-powered credit transaction process including setting a maximum spending limit, paying in monthly installments and completing payments between merchants and consumers.
The firm said the patent is a notable advancement from the status quo whereby most blockchain-based services available are limited to cash wiring or user identification for online transactions.
Another strong point is that the new technology enables the "smart" integration of electronic devices in line with the "internet of things (IoT)," defined as an extension of connectivity into physical devices and everyday objects.
For example, payment requests will be made by home appliances and automobiles within spending limits set by a card owner.
Blockchain technology, known to be resistant to data modification, is used to help with "self-sovereign identity," which remains largely impossible without the help of intermediaries ― mostly government-certified or public entities that manage personal data.
A consortium ― participated in by KEB Hana Bank, Woori Bank, KOSCOM, SK Telecom, KT, LG UPlus and Samsung Electronics ― was launched July 12 to launch a blockchain-based form of mobile identification in 2020.
The highest-profile industry players joining the move is based on the shared idea that the new technology will help efficient, verifiable and permanent recordkeeping, groundwork that could be a base to developing more advanced technology.
Also factored into the idea is that the risk of fraud will be removed as the data recorded with the technology cannot be easily altered retroactively, which helps ensure accountability.
Discussion on ways to establish possible business models is ongoing with a consortium led by the Korea Financial Investment Association with 26 financial participants including services firms such as banks, securities and a blockchain technology firm.
Global financial services firms are also boosting efforts to utilize blockchain technology.
New York-based American multinational investment bank JP Morgan Chase is reported to have started a new division, Quorum, whose primary function will include research and implementation of the technology to help support seed transactions.
Bank of America is seeking to obtain a patent to use a blockchain-based system for securing records and authenticating business and personal data.
Furthermore, the system will seek to combine multiple existing data storage platforms into one.
Goldman Sachs reportedly invested in a cryptocurrency project called Circle seeking to solve the key problem of volatility in the digital currency space, thereby making the financial sector more reliable with crypto options.
While no firms in the world has yet to identify ways to link the new technology still in its infancy with profitability, tangible results ― however long they may take ― will come, according to an expert.
"Many attempts have been and will continue to be made to implement the new technology," Suh Jeong-ho, digital finance research center head at Korea Institute of Finance, said.
"Many experiments should be conducted to produce constructive failures through which industry figures will learn and adjust their method of finding the right path toward efficient implementation of the technology. Challenges such as government regulatory hurdles and innate technological shortcomings will be tall tasks to overcome," he added.
