Commercial banks explore the way "blockchain +"

Economic Daily-China Economic Network reporter Qian Yan

Source: Economic Daily

Blockchain technology, as one of the core technologies of fintech, has a wide range of application scenarios and a promising future. As commercial banks are active participants in blockchain technology, what exactly does blockchain technology change for banks? What changes will happen in the future? To this end, a reporter from the Economic Daily-China Economic Network surveyed commercial banks such as Zheshang Bank and Postal Savings Bank for answers.

 

"Blockchain + Supply Chain":

High-tech "ledgers" help smooth financing

The blockchain is essentially a decentralized distributed database, an innovative application model of multiple technologies such as distributed data storage, multi-center point-to-point transmission, consensus mechanisms, and encryption algorithms in the Internet era.

In layman's terms, blockchain can be likened to a "ledger". The traditional ledger is "centralized bookkeeping" by one party, and this new "ledger" can be participated and shared by multiple parties on the Internet. Each participant can "book" and back up, and each backup is a "block". Each "block" is linearly connected in chronological order, and its structural characteristics prevent records from being tampered with and forged.

As a high-tech "ledger" that cannot be tampered with, the most direct application of blockchain technology in the economic and financial field is to alleviate the problem of depositing receivables in the supply chain. For a long time, enterprises have used a large amount of credit sales to defer settlement in their actual operations. The resulting stagnation of accounts receivable has caused difficulties in financing and expensive financing, which has restricted the development of enterprises. As of the end of 2018, the total accounts receivable of industrial enterprises above designated size in China were 14.3 trillion yuan, accounting for 13.99% of the main revenue, and the average payback period of accounts receivable was 47.4 days.

To ease the financing difficulties of SMEs, revitalizing accounts receivable is the key. Previously, the "Several Opinions on Strengthening Financial Services Private Enterprises" issued by the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council pointed out that commercial banks must rely on the core corporate credit of the industry chain, the background of real transactions and the closed loop of logistics, information flow, and capital flow. Downstream companies provide order financing and accounts receivable financing without mortgage guarantees.

In order to embody this policy spirit, Zheshang Bank actively builds the receivables chain platform, and uses the decentralization, openness, transparency, smart contracts, and non-tamperable features of blockchain technology to solve the receivables registration and confirmation of rights. And other problems, transforming the accounts receivable into a blockchain creditor's right circulation tool, helping upstream and downstream SMEs to revitalize stagnant financial assets.

Corresponding to the core enterprises on the payment chain platform, the blockchain receivables issued by them can be circulated in the supply chain business circle, which is conducive to building a healthy and stable supply chain ecosystem. For upstream and downstream SMEs, their After receiving the blockchain receivables issued by core companies, they can not only be split and transferred to upstream suppliers, but also transferred to banks for financing at any time, helping companies and the entire industry to "de-leverage and reduce costs."

"Blockchain + Business Circle":

Expanding the "Smile Curve" of the supply chain

Wujiang Xingsheng Packaging Materials Co., Ltd. from Suzhou, Jiangsu is one of the beneficiaries of Zheshang Bank's exploration of blockchain technology applications.

The company's main carton accessories supplies Hengli Chemical Fiber, the largest polyester manufacturer in China, with sales amounting to more than 40% of the company's sales revenue. Prior to this, Xingsheng Packaging and Hengli Chemical Fiber mostly settled with commercial tickets, with long settlement cycles and difficult bill activation. "The order funds given by large enterprises accounted for the company's liquidity. It took a long time for the company to stand up," the company official recalled.

In response, Zheshang Bank used the receivable chain platform to build a supply chain business circle for Hengli Chemical Fiber. In the business district of the platform, Hengli Chemical Fiber uses the "payer's issuance and acceptance" model to issue receivables to other suppliers such as Xingsheng Packaging, and uses its "idle" credit line to apply for confirmation with banks. Unlike commercial tickets that are not easy to activate, suppliers who receive blockchain receivables on this platform can directly monetize or withdraw short-term loans at Zheshang Bank and complete them online.

As of the end of September, nearly 60 upstream and downstream enterprises from Shanghai, Jiangsu, and Zhejiang have joined the Hengli chemical fiber business district, with a cumulative amount of 450 million yuan issued, and the short-term loan balance of small enterprises is about 230 million yuan. Working with Zheshang Bank to help a group of small and medium-sized suppliers to obtain lower-cost financing and share fintech dividends, they also further combed and consolidated their own supply chain relationships and expanded their own supply chain "smile curve." As of the end of June, such a platform, Zheshang Bank had a total of more than 1,800 landings, helped more than 8,000 companies to finance more than 170 billion yuan, and effectively cleared the "blocking point" of funds for various types of enterprises, especially SMEs.

In fact, as one of the pioneers in the application of blockchain technology by domestic commercial banks, Zheshang Bank launched a blockchain-based mobile digital money order platform as early as 2016, becoming the first in the industry to apply blockchain technology to its core business. Banks; in 2017, they also developed "blockchain + supply chain finance" products such as receivables chain platforms and warehouse receipts, and successively built "Caiyiyun" personal financial transaction platforms and interbank asset trading platforms to achieve The full coverage of blockchain technology in corporate business, retail business and financial market business.

A few days ago, "a blockchain key management system and method" of Zhejiang Commercial Bank was granted an invention patent by the State Intellectual Property Office, becoming one of the few commercial banks with patents in the field of blockchain technology. At present, the bank also has a number of blockchain-related patents under trial.

 

"Blockchain + Forfaiting":

Relieve multiple pain points such as inefficient interaction

The Postal Savings Bank, which is also one of the forerunners, established a special research group on blockchain technology in October 2015 to carry out technical research and product innovation of the blockchain. In early 2016, after research and evaluation, the bank selected Two business scenarios apply blockchain technology; they also gave a series of names to the blockchain system in the industry called "U-Chain", which is the homonym of "Post-Chain" and represents the postal-bank bank blockchain.

In October 2016, the U-Bank custody business system of the Postal Savings Bank was successfully put into production, shortening the original business link by 60% to 80%, making credit exchange more efficient. In June 2018, the U.S. Post Bank's U-chain Forfaiting system was successfully put into production, and realized the four major cross-border domestic letters of credit on-chain transactions, domestic financial letter trade financial asset information matching, asset transactions and business full-process management Core functions, and completed the first blockchain Forfaiting interbank transaction in September 2018.

Forfaiting's business is a business in which the issuing bank / acceptance bank makes a commitment under the forward domestic letter of credit to pay the unexpired amount under the letter of credit without recourse. The business rules are complex, with many materials and high timeliness requirements. In the traditional business model, offline order submission, order review and other processes are required. There are “pain points” such as different rules, inefficient interaction, complicated processes, and asymmetric information.

Postal Savings Bank U-chain Forfaiting business system adopts blockchain technology based on super ledger, and uses the blockchain's distributed ledgers, smart contracts, consensus mechanism and other technical features to promote the realization of forfaiting business information sharing and improve cross-banking The efficiency of business processing and the security of business processing.

Specifically, the application of blockchain technology to Forfaiting's business is as follows: First, the asset holding bank can reach a tripartite consensus with the letter of credit issuing bank and the outsourcing bank to complete the transfer of creditor's rights and improve the business. Processing efficiency. Second, with the help of smart contracts such as creditor's rights transfer and document vouchers, it can support multiple parties' understanding of data consistency, effectively enhance mutual trust between transaction entities, and reduce credit risk. Third, the transaction matching function can improve the efficiency of inquiry and quotation between institutions and the conclusion of transactions. Fourth, sharing ledgers through blockchain technology can achieve equal transactions, transparent information, and synergy and win-win results. Fifthly, it supports API interface access mode and Web page access multi-mode, which is convenient and fast for accessing the platform. Since the launch of the system, the accumulated business volume has exceeded 10 billion yuan.

A related person of the Postal Savings Bank said that at present, the bank is working on the upgrade and transformation of the U-chain forfeiting business system version 2.0, including cross-chain networking with other alliance chains. After the cross-chain is completed, it will continue to expand the Postal Savings Bank Forfaiting transaction scale, perfect system ecology. "The Postal Savings Bank shall further expand the basic service platform of the blockchain, commercialize its superior business capabilities in the industry, focus on segmented markets, expand its business scale, and establish a postal banking service platform-level business model that supports multiple deployment methods "Said the person.