Blockchain: The buzzword in Singapore Fintech

Blockchain is becoming an increasingly common buzzword locally, particularly within Singapore’s Fintech industry. As Singapore banks positively support the rise of blockchain, what are the applications and will the trend last to attract more investors to our shores?

The beginning
There are several people today who immediately associate blockchain with Bitcoin. Given the nature of the technology – i.e. when a transaction occurs, everyone on the network knows about it almost immediately, and it is secure – it made sense for cryptocurrencies to adopt blockchain.

But it is no wonder that it has evolved with real implications to disrupt the financial industry, which today uses other (slower) processes to keep records for asset transfers and more.

There are several promising, real-world applications for blockchain applications across the financial sector. Some of these are:

The ability to speed up and simplify cross-border payments
It’s a known fact that the transfer of value has always been an expensive and slow process, particularly when it comes to cross-border payments. Blockchain tech is able to make this process much more efficient, while also reducing costs involved significantly.

Allows the creation and benefits of smart contracts
Smart contracts allow the execution of commercial transactions and agreements automatically. Just like “regular” contracts, it holds the same law and enforces the obligations of all parties involved, but without the requirement of a middleman. This means that contracts can be expedited, minus additional costs.

Greater trade accuracy, and a shorter settlement process
Share trading will also soon be impacted by the blockchain. As shown by the early adoption by cryptocurrencies and the above examples, it has the potential to improve many processes within the financial sector, which includes share trading.

Currently, buying and selling stocks and shares involve multiple middlemen, e.g. brokers and the stock exchange itself. Utilising blockchain gives every party a say in the validation transactions, speeds up settlement processes, allows greater trade accuracy, and again, cuts out some of the ‘middlemen’.

The secret of its success
The promise of blockchain’s success lies in its “ability to record, store and move any assets with great ease, through automation and in a decentralized manner.” PWC estimated that blockchain could potentially save between US$5 billion and $10 billion in reinsurance, thanks to improvements in placement, claims settlement, and compliance checks.

So it comes as no surprise that Asian fintech investments are predicted to rise to $10.5 billion this year, driven mainly by banks and fintech startups as reported by Bloomberg.

In Singapore, United Overseas Bank’s accelerator program FinLab, is making waves within the sector. Of particular interest is a blockchain proof-of-concept by company Attores, who are building a platform that has a repository of smart contracts and an application that secures the self-executed agreements.

Blockchain road blocks
With any disruptive technology, adoption and scalability will not be without challenges. Many expect to see a demonstration of immediate value, but forget that there is a complex, legacy infrastructure that requires detangling. There are also several debates over regulations, technical issues, security concerns and more.

Organizations should also put more thought into how to put blockchain technology to work – at the moment, many are barely scratching the surface. However, the reality is that blockchain is here to stay for at least the next decade. For financial institutions, the main question remains not if or when blockchain becomes mainstream – it is a question of who will be leading the way.