Korean Banks to Roll out Blockchain-based Authentication Service

A service which applies blockchain technology to financial certification will be rolled out next month. Experts say that it is necessary to expand the applications of blockchanin technology to trade finance and overseas remittance to make the most of the new technology.

According to the banking industry on July 18, Bank Sign, Korean banks will jointly introduce a blockchain-based authentication service next month. The Bank Sign Service aims to prevent forgery and corruption through agreements among participants and distributed storage, which are the characteristics of blockchain technology. The banking industry started to develop it last year by forming a consortium with the Korea Federation of Banks taking the lead. In late April, bank employees tested the service and the service is close to its commercialization.

However, some people point out that the Bank Sign Service is not significantly different from existing financial authentication certificates and the application of blockchain technology in the financial sector should be urgently extended beyond the simple security certification sector. Especially, a prevailing opinion is that blockchain technology needs to be applied to trade finance and overseas remittance.

In the case of trade finance, the current procedure is quite complex and costs much time and money. In order to trade, a company has to go through more than 10 complicated steps such as signing a contract, applying to open a letter of credit, sending the letter of credit and notifying of the arrival of the letter of credit. As the trade procedure is complex, there are a large amount of commissions and high security costs during the procedure.

However, the application of blockchain technology to trade finance will help streamline the trade procedure, reduce additional costs and enhance security. "Currently, trade finance is mostly manual work, and there is much work to share data in trade finance," said a researcher at the Korea Institute for Finance. "The application of blockchain technology will enable the automation of documents in opening letters of credit and producing customs clearance and purchase documents, making it possible to deliver trade information to many people quickly."

Overseas remittance is also a sector that requires the application of blockchain technology. Currently, for overseas remittances, you need the foreign account number and name of the receiver, the name of the receiver’s bank, and the bank’s swift code which is the bank’s international identification code. Overseas remittances using a swift code cost a user time and money because it has to go through the user and various institutions such as a domestic bank and an overseas bank.

The application of blockchain technology can save users time and cost for remittance. "In order to efficiently transfer money abroad, it is necessary to have a network system that can easily share related information. The current swift code system is closed and ineffective," said an official at an international financial center "Blockchain technology will eliminate an unnecessary relay procedure."

Currently, Korean banks are in the toddler’s stages in using blockchain technology related to these fields or they have not discussed the matter yet. Some banks in Korea recently completed technical tests for overseas remittance, but there are no concrete plans to commercialize the technology. On the other hand, overseas banks such as those in Japan are said to reach a high level in the commercialization of international financial transactions based on blockchains.