It’s fair to say the retail banking sector, at least, is already in a “red ocean” because it’s been losing trust with its customers rapidly. Amid an era of convergence, as barriers are blurring between technology and traditional banking systems, Korea’s leading banks are on track to possibly disrupt their conventional way of functioning thanks to the emergence of blockchain technology.
The technology promises much for the retail, corporate and banking sectors. But it has to satisfy several outstanding conditions before becoming a core mainstream technology in banking. A key point is that with the finance sector digitization accelerated with the pandemic-led social distancing measures, local Korean banks are seeking to use blockchain technology more both in retail and corporate banking.
Based on the blockchain’s decentralized ledger technology, banks aim to apply the technology in various ways, such as increasing the safety level of their banking apps and streamlining complicated processes for identification certification. Critics say that most retail businesses haven’t taken up use of blockchain technology. As for the banking industry, strict regulatory requirements create high entry barriers for the technology.
Shinhan Bank has recently applied a decentralized identifier (DID) technology to their banking app SOL. The DID enhances protection of users’ identification with easier access, while blockchain technology could lower the possibility of theft, falsification or forgery, compared to the nation’s prevalent financial authentication certificates. The bank joined hands with blockchain platform company ICONLOOP to develop the service.
Customer ID verification is a necessity for banks to keep check on money laundering. Still, a customer has to repeat this lengthy ID verification process for every new service and bank since the identity verification systems are not integrated.
Shinhan Bank has been relying on blockchain technology to streamline parts of its review process of loan products for doctors. The system will be applied to a larger group of borrowers within this year.
KB Kookmin Bank, earlier this month, signed a strategic partnership with blockchain venture fund Hashed, blockchain digital asset firm Haechi Labs and crypto trading platform company Cumberland Korea. The move was part of the bank’s efforts to expand its innovative services and technologies in the area of digital assets. Specifically, the bank plans to develop businesses to manage and trade cryptocurrencies, real estate and art using blockchain technology.
NongHyup Bank is preparing digital asset services based on DID technology, together with other NH Financial Group affiliates such as NH Investment & Securities, NH Savings Bank and NH Capital.
The bank will also adopt blockchain technology in its loan products for government employees. With the decentralized identity authentication, government employees will be able to borrow money from the bank instantly, doing away with a lot of red tape presently required to take out loans.
Hana Bank is another frontrunner in the area. The bank has been selected to join the government’s pilot blockchain business programs for two consecutive years. The bank collaborates with Korea Expressway Corporation, allowing users to conveniently pay tolls through its banking app. The bank also applies the blockchain platform in issuing student ID cards with partnering universities.
Woori Bank is also collaborating with the government’s pilot blockchain consortium partners, developing a pilot service for mobile electronic identity authentication. The bank has also partnered with Kakao’s blockchain arm Ground X, working on B2B token payment services.
Anna J. Park(2020.08.31) Local banks embrace blockchain technology
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