China Merchants Bank uses blockchain technology to achieve cross-border direct settlement, shortening message transmission to seconds

On February 24, China Merchants Bank announced that it had achieved new breakthroughs in blockchain technology, becoming the first bank to apply blockchain technology to the three major scenarios of global cash management: cross-border direct clearing, unified view of global accounts, and cross-border funds collection.

In June 2016, China Merchants Bank passed the POC experiment of cross-border direct clearing business and took the lead in applying blockchain technology to the core banking system. After half a year of stable operation in the simulation environment, China Merchants Bank plans to officially commercialize the cross-border direct clearing business transformed by blockchain technology between the head office, Hong Kong branch and Wing Lung Bank in the two sides of the Taiwan Strait and Hong Kong.

China Merchants Bank is the first joint-stock bank to launch the Global Cash Management service, which has achieved the integration of offshore, free trade zone, Hong Kong branch, Wing Lung Bank, New York branch accounts and online banking. China Merchants Bank said that the introduction of blockchain technology in the field of global cash management has not only achieved new breakthroughs in the underlying technology of the original cash management, but also provided a broader imagination space for the widespread application of cash management models in the current Fintech situation.

“CMB Direct Payment Blockchain Platform”

Blockchain technology is essentially a distributed ledger technology that records accounts in a decentralized and trustless manner, thereby reducing transaction costs and improving transaction efficiency. The recording method of distributed ledgers of blockchain technology determines that it is tamper-proof, and also makes it an excellent way to record data and information in some occasions. Even the central bank has joined the practical exploration of blockchain applications. It is understood that the blockchain-based digital bill trading platform promoted by the central bank has been successfully tested. In early 2016, China Merchants Bank paid attention to the business opportunities brought by blockchain technology to banking business. At the head office level, the transaction banking department and the information technology department jointly formed a blockchain research group to conduct in-depth research, participate in multiple domestic and foreign blockchain innovation application cooperation alliances, and actively explore how to use blockchain technology in the application scenarios of transaction banking business processing and services.

However, blockchain technology also has some application-level problems, such as the unsuitability of single-chain data structures for certain scenarios, security and privacy issues caused by distributed shared ledgers, difficulty in unifying rules for smart contracts, and the need to optimize the core consensus mechanism, which seriously restrict the application of blockchain technology in the financial field. After in-depth pre-research on blockchain technology, China Merchants Bank has solved the above application problems in specific scenarios, independently innovated and developed, implemented the "China Merchants Bank Direct Payment Blockchain Platform", passed the POC verification test, and promoted the project to be officially commercialized.

Message delivery is shortened to seconds

Before the transformation, China Merchants Bank's cross-border direct clearing system had some problems, such as only supporting exchanges between the head office and overseas branches, and no direct exchange between overseas branches; many manual approval links, complex system operations; difficulty in joining new overseas institutions, and a long implementation cycle, etc. Through the transformation, China Merchants Bank has achieved six overseas institutions plus the head office, all of which are connected to the blockchain, and any two institutions can initiate a clearing request and any two institutions can conduct clearing.

The new cross-border direct clearing system based on blockchain has shown new advantages: high efficiency. After decentralization, the message transmission time is reduced from 6 minutes to seconds; high security. In a private chain closed network environment, messages are difficult to tamper with and forge; high availability. The distributed architecture does not have a core node, and the failure of any node will not affect the operation of the entire system; high scalability. New participants can be quickly and conveniently deployed and added to the system.

At the same time, China Merchants Bank has also actively strengthened the exchange and research of blockchain among peers. It is understood that China Merchants Bank is currently cooperating deeply with overseas peers to conduct cross-border payment concept verification and jointly formulate technical standards for cross-border messages among peers. The commercial use of cross-border direct clearing based on blockchain technology marks that China Merchants Bank has become a reality in the field of global cash management. It also means that China Merchants Bank has deeply mastered the core of blockchain technology and is at the leading level among peers in the application of blockchain technology.

In addition, the Phase II project is also under continuous follow-up research and development. The unified view of global accounts and cross-border funds collection scenarios will undergo POC verification in the near future and will be launched within the year.

Create an ecosystem for blockchain financial business applications

The application of blockchain technology in various banking businesses is no longer just talk. The successful implementation of this project has enabled China Merchants Bank to explore a basically mature and usable blockchain underlying architecture, which can support other subsequent blockchain application projects, such as the application of blockchain in the fields of bills and supply chain finance. And it can be easily expanded to various business scenarios such as between peers, between banks and enterprises, and between enterprises. China Merchants Bank said that the bank is determined to create an ecosystem for blockchain financial business applications and popularize the convenience brought by blockchain technology to everyone.

(Editor: Yan Qinbo)