OCBC Bank becomes the first bank in Southeast Asia to use blockchain technology to enable cross-border payment transactions

On November 21, OCBC Bank, the second largest financial services group in Southeast Asia, and its subsidiaries OCBC Malaysia and Singapore, successfully conducted a trial run of a blockchain payment transaction solution. The solution was jointly designed by OCBC Bank and BCS Information Systems (BCSIS), a local bank payment solution company in Singapore.

With the success of this pilot, after the integration of this payment transaction solution is completed, based on the BCSIS data blockchain platform, the cross-border payment process between local and overseas banks in Singapore will no longer need to go through payment intermediaries.

OCBC Bank is the oldest local bank in Singapore. As one of the most highly rated banks in the world, OCBC Bank has a Moody's Aa1 rating. Its major markets include Singapore, Malaysia, Indonesia and Greater China. OCBC Bank has more than 610 branches and representative offices in 18 countries and regions.

OCBC Bank's private banking services are provided by its wholly owned subsidiary , Bank of Singapore, which offers clients a top-of-the-line portfolio across asset classes through a unique open product platform.

In addition, OCBC Bank also plans to gradually expand data blockchain technology to other financial products and services. OCBC Bank's latest financial technology innovation plan actively responds to the Monetary Authority of Singapore ( MAS)'s vision of "smart financial center" and the policy of "creating a culture of innovation in the financial industry." Mr. Ravi Menon, Director of the Monetary Authority of Singapore, shared this vision at the Global Technology Law Conference on June 29, 2015, which is also part of the Singapore government's "smart nation" plan.

The pilot included two payment transactions:

1. Cross-border transfers between OCBC Bank Singapore and OCBC Bank Malaysia.

2. Local transfers between OCBC Bank Singapore and its subsidiary, Bank of Singapore, which provides private banking services.

As one of the fastest growing financial technologies in the financial industry in recent years, blockchain is the supporting technology of virtual currency (Bitcoin) and is considered to be one of the most transformative innovations to date. Blockchain is essentially a digital ledger that records data and combines them into "blocks", which are then securely encrypted and chronologically bound into a "chain". The ledger is distributed among the various constituent parties in the network, and all parties must reach a consensus to authenticate transactions.

Therefore, blockchain is a form of distributed ledger that can eliminate the need for intermediaries when operating, compared to traditional ledgers maintained by centralized institutions.

The data blockchain payment transaction solution has four major advantages:

High security: Fund transfer data is recorded in a digital ledger and once encrypted, it cannot be modified or tampered with. This keeps transaction information private and secure, reducing the risk of fraud.

Shorten the turnover cycle: After removing the payment intermediary and manual processing in traditional payment transactions, the transfer transaction based on data blockchain technology can be carried out directly between the remitting bank and the receiving bank, effectively reducing the processing time. For example, the transfer transaction between OCBC Singapore and OCBC Malaysia usually takes 1 day, but it can be completed within 5 minutes after adopting the new technology.

Improve transaction transparency: With the removal of traditional intermediary trading platforms, the transaction flow between the sender and the receiver will be clearer and the transaction process will be easier to track.

Reduced costs: The distributed nature of blockchain technology’s digital ledger eliminates the need for centralized institutions (transaction intermediaries in the traditional model) and manual processing, thereby reducing costs.

OCBC Bank is the first to apply this technology to payment transactions, which once again demonstrates OCBC Bank's continued efforts and fruitful results in digital innovation. Not long ago, in May 2016, OCBC Bank also took the lead in launching the bank's open application programming interface (API).

Mr. Praveen Raina, Senior Vice President of Group Operations and Technology at OCBC Bank, said: "Blockchain technology is the most revolutionary technology currently available. It will revolutionize the financial industry and change the way we work. OCBC is pleased to be the first bank in Southeast Asia to pilot real-time cross-border payment transactions using blockchain technology. This pilot lays the foundation for changing the traditional cross-border payment model. It is not only of great significance to us, but also a milestone for Singapore as Asia's financial center. We hope that this pilot will serve as a catalyst for more banks to adopt blockchain technology, so that we can work together to provide customers with more high-value financial services in an efficient and cost-effective manner."

“This innovative adoption of blockchain technology further reinforces OCBC’s culture of innovation, where we have repeatedly set new precedents, including being the first bank in Southeast Asia to launch an open Application Programming Interface (API), the first bank in Asia Pacific to support secure payments through Apple’s Siri and iMessage, and the first bank in Singapore to implement fingerprint recognition in its mobile banking application,” said Mr Sopnendu Mohanty, Chief FinTech Officer, Monetary Authority of Singapore.

He also said that over the past two years, the Monetary Authority of Singapore and financial industry bodies have been working together to build a thriving fintech ecosystem in Singapore. OCBC Bank's move is a testament to our bank's dynamism in applying innovative technologies to real-world operations, especially in complex businesses such as cross-border payments.