7 Blockchain application trends in the banking and finance sector
According to a recent survey by ReportLinker, the application of blockchain in the global banking and financial services market is expected to grow from $1.17 billion in 2021 to $1.89 billion in 2022 at a rapid rate. The compound annual growth rate (CAGR) is 61.9%.
Notably, although North America is currently the largest region in the blockchain finance and banking market in 2021, the Asia-Pacific region is expected to be the fastest-growing region in the near future. next. Internationally, large companies are applying blockchain to financial and banking activities, including: Amazon Web Services, Microsoft, IBM, Intel, JPMorgan, ConsenSys, R3, Oracle,…
Blockchain application in finance and banking brings many advantages, such as optimizing capital, reducing operating costs, improving transparency, and helping to increase financial solutions.
In essence, blockchain is a distributed ledger or database of public records that is shared publicly among various users and creates an immutable record of their transactions.These transactions are cryptographically secure to ensure against tampering.
Therefore, blockchain is expected to revolutionize the financial and banking industry comprehensively in many services; not only that, but blockchain also has breakthrough potential in other fields such as healthcare and government. Digital, real estate, logistics, education, retail…
From a legal perspective, in Vietnam, blockchain is prioritized for research, development, and application to actively participate in the Industrial Revolution 4.0, according to Decision No. 2117/QD-TTg dated December 16, 2020 of the Prime Minister. Prime Minister. In particular, the Ministry of Science and Technology has also approved the National Key Science and Technology Program for the period to 2025, where blockchain technology is ranked second after artificial intelligence (AI) in key technologies.
Mr. Phan Duc Trung, Standing Vice Chairman of the Vietnam Blockchain Association, presented an overview of seven blockchain application trends in finance and banking at the seminar, including: smart contracts (smart contracts); ICOs (funding process); tokens collateralized by assets; non-fungible assets (NFT); a central bank (CBDC); decentralized finance (Defi); and automated financial advice (Robo Advisor).
According to Mr. Phan Duc Trung, the application of blockchain will help banks cut the costs of internal intermediary administration through the consensus mechanism for approving transactions. This is the result of applying the advantages of blockchain to the problems that promote the fintech ecosystem to create an ecosystem around the core of the bank.
Notably, representatives of a number of banks in Vietnam, such as BIDV, Vietcombank, and TPBank, who participated in the event, said that they had conducted a trial to use blockchain in financial services at their bank and initially achieved one result number.
For example, a representative of BIDV said that this bank is pioneering the application of blockchain in trade finance, becoming the first Vietnamese bank to successfully apply blockchain technology in the transaction of issuing letters of credit to a bank. system notifications.
Meanwhile, a representative of Vietcombank said that this bank has been piloting blockchain transactions since December 2020 and is currently cooperating with fintech companies to research and expand the application of this technology.
On the business side, Viettel stated that it has used blockchain to create electronic medical records; Misa creates electronic invoices; and some other companies stated that they have successfully used blockchain in the past, such as Masan, Bao Viet, AIA…
In addition, representatives of some banks, such as Vietcombank and TPBank, also mentioned some limitations and shared experiences when testing blockchain applications by these banks, such as legal barriers, barriers on investment costs for integrated technology infrastructure, or difficulties in expanding the transaction network by connecting multilaterally.
Two core difficulties need to be solved when applying and replicating Blockchain technology
Data from the Payment Department (State Bank of Vietnam) show that the number of Fintech enterprises providing services in the Vietnamese market has nearly quadrupled, from 40 at the time.By the end of 2016, it had grown to more than 150 enterprises spread across many different fields, with Bitcoin and blockchain businesses accounting for nearly 7.9% of the total.
From the perspective of the management agency, Mr. Vu Cong Hung, Deputy Director of the Information Technology Department (SBV) acknowledged that, although Blockchain is not a suitable solution for all cases, it has the potential to change. significantly how the systems work.
According to Hung, this technology has great potential for reducing transaction costs, allowing direct transactions between users in a safe way. In the field of finance and banking, a number of Blockchain-based products have been used in practice such as letter of credit (LC) transactions, money transfer…
At the same time, Mr. Hung also pointed out that the current application of Blockchain technology is still difficult and challenging in many aspects, of which leaders of specialized agencies of the State Bank pointed out 5 specific points: First, the high cost of bandwidth and storage; second, slow processing capacity; third, security risks such as a 51% attack, loss of a secret key, and lack of privacy; fourth, the lack of legal regulations and technical standards; and fifth, the lack of high-quality human resources.
The State Bank representative emphasized two difficulties in bringing Blockchain technology into practical application in Vietnam in general and in the banking industry in particular, in addition to the five issues listed above. – especially finance.
The first consideration is the legal significance of electronic signatures on Blockchain platforms.
As a result of its decentralization, encryption, and peer-to-peer network characteristics, Blockchain technology fosters network trust without relying heavily on centralized authority.
To create and authenticate electronic signatures for transactions, most Blockchain systems provide members with a Private key and a Public key.
However, the Deputy Director of the Information Technology Department stated that, under current regulations, there is no specific corridor for authenticating electronic signatures.