Blockchain technology, which holds the potential to reduce banks’ business operations costs worldwide by up to 50 per cent, is increasingly disrupting the region’s banking sector, say experts.
The technology is an online, encrypted database that allows multiple parties to have real-time access to transactions related to documents, shares, financial products and digital currency.
"Blockchain holds the promise of bringing greater efficiency and transparency to the banking industry, for instance, allowing cross-border transactions to be made in real time, and money to be exchanged at the speed with which information moves today," Motasim Iqbal, head of transaction banking at British lender Standard Chartered, UAE, told The National.
The global financial services industry spends about $1.7 billion per year on blockchain as banks and other financial institutions start to roll out commercial distributed ledger technology, the US-based research firm Greenwich Associates said in a report in June.
Around 60 per cent of the UAE’s chief executives expect to invest in blockchain technology in 2018 while more than 70 per cent of global banks are experimenting with permissioned blockchain, which allows to appoint a group of participants who are given the authority to provide the validation of blocks of transactions, according to the KPMG’s study. The Central Bank of the UAE has also announced a joint project with the Saudi Arabian Monetary Authority to use blockchain to issue a digital currency for cross-border transactions between the two countries.
Standard Chartered, which is working with clients to bring new financial capabilities to the market, has signed a pact with Siemens Financial Services and TradeIX (a digital trade provider) to carry out an industry-first client pilot to create an end-to-end blockchain-based smart guarantees service in trade finance. This will transform the traditionally paper intensive bank guarantees business and fully digitise the process.
“We believe this technology can be helpful to improve security, efficiency and over all simplification of processes in the industry,” said Mr Iqbal. “We are focusing on blockchain technology’s trade and cash applications. We have been engaged in a number of projects and initiatives to use this technology in innovative ways to improve the experience and efficiency for our clients and industry.”
UAE is a key market for Standard Chartered and this industry-first client pilot is in line with the Emirates Blockchain Strategy 2012, that was launched earlier this year to transform 50 per cent of government transactions into the blockchain platform by 2021.
However, service providers feel that regional banks need to adapt to fully take advantage of blockchain disruption.
“Its [blockchain] main aim is to eliminate all intermediaries, add transparency, security and reduce costs. It will certainly impact traditional ways of banking. Though countries like the UAE and Saudi Arabia have already started the work, regional banks need to transform to stay relevant in the new space,” said Rasheed Al Omari, principal business solutions strategist – South Europe, Middle East and Africa at VMware, whose parent company is Dell Technologies.
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VMware, which is providing infrastructure to enterprises to adopt blockchain technology at reduced costs, is going to announce new solutions in the region in the coming days. Through their new project Concord, VMware is poised to help businesses harness blockchain technology in an efficient manner to advance their business goals.
Worldwide spending on blockchain solutions is forecast to reach $11.7bn in 2022, according to an International Data Corporation report.
“Blockchain, with its peer-to-peer networking model, enables near real-time settlement models for most types of financial transactions, which could eliminate counter-party risk, free up capital and radically reduce transaction costs,” said Jeroen Schlosser, managing director at major data centre provider Equinix, Middle East and North Africa.
However, industry experts say blockchain uptake and use in the banking sector is nascent at present.
"Blockchain technology development is still in its infancy, with numerous issues still remaining unsolved, notably in terms of scalability, efficiency, privacy and cyber security," Alberto Perucchini, analyst at Swiss private banking group Julius Baer, told The National.
“Consequently, working applications in the financial and banking sector, whether in capital markets, payments or back office processes, remain a longer-term prospect.”
Kalle Bjorn, director of systems engineering at Fortinet, a cybersecurity software developer, told The National: "Success of blockchain in banking greatly depends on how robust cybersecurity is to ward off threats from all directions. It is important that all participants be protected from any unauthorised access."
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UAE currency: the story behind the money in your pockets
Mercedes V250 Avantgarde specs
Engine: 2.0-litre in-line four-cylinder turbo
Gearbox: 7-speed automatic
Power: 211hp at 5,500rpm
Torque: 350Nm
Fuel economy, combined: 6.0 l/100 km
Price: Dh235,000
Labour dispute
The insured employee may still file an ILOE claim even if a labour dispute is ongoing post termination, but the insurer may suspend or reject payment, until the courts resolve the dispute, especially if the reason for termination is contested. The outcome of the labour court proceedings can directly affect eligibility.
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Indoor cricket World Cup:
Insportz, Dubai, September 16-23
UAE fixtures:
Men
Saturday, September 16 – 1.45pm, v New Zealand
Sunday, September 17 – 10.30am, v Australia; 3.45pm, v South Africa
Monday, September 18 – 2pm, v England; 7.15pm, v India
Tuesday, September 19 – 12.15pm, v Singapore; 5.30pm, v Sri Lanka
Thursday, September 21 – 2pm v Malaysia
Friday, September 22 – 3.30pm, semi-final
Saturday, September 23 – 3pm, grand final
Women
Saturday, September 16 – 5.15pm, v Australia
Sunday, September 17 – 2pm, v South Africa; 7.15pm, v New Zealand
Monday, September 18 – 5.30pm, v England
Tuesday, September 19 – 10.30am, v New Zealand; 3.45pm, v South Africa
Thursday, September 21 – 12.15pm, v Australia
Friday, September 22 – 1.30pm, semi-final
Saturday, September 23 – 1pm, grand final
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UAE jiu-jitsu squad
Men: Hamad Nawad and Khalid Al Balushi (56kg), Omar Al Fadhli and Saeed Al Mazroui (62kg), Taleb Al Kirbi and Humaid Al Kaabi (69kg), Mohammed Al Qubaisi and Saud Al Hammadi (70kg), Khalfan Belhol and Mohammad Haitham Radhi (85kg), Faisal Al Ketbi and Zayed Al Kaabi (94kg)
Women: Wadima Al Yafei and Mahra Al Hanaei (49kg), Bashayer Al Matrooshi and Hessa Al Shamsi (62kg)
Ain Dubai in numbers
126: The length in metres of the legs supporting the structure
1 football pitch: The length of each permanent spoke is longer than a professional soccer pitch
16 A380 Airbuses: The equivalent weight of the wheel rim.
9,000 tonnes: The amount of steel used to construct the project.
5 tonnes: The weight of each permanent spoke that is holding the wheel rim in place
192: The amount of cable wires used to create the wheel. They measure a distance of 2,4000km in total, the equivalent of the distance between Dubai and Cairo.
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Biog
Age: 50
Known as the UAE’s strongest man
Favourite dish: “Everything and sea food”
Hobbies: Drawing, basketball and poetry
Favourite car: Any classic car
Favourite superhero: The Hulk original
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The view from The National
Killing of Qassem Suleimani