Opinion: The blockchain is not effective in the short term, and the investment in basic R&D of large domestic banks needs to be improved.

Author: Bank of Communications, Center for Financial Research Research Commissioner Zhang Zheyu; Bank Postdoctoral Postdoctoral Wen Qiao sweet

Source: China Securities Network

Editor's Note: The original title is "Capturing New Opportunities in Blockchain, Banking Industry Should Have New Actions"

Since Zhong Bongcong mentioned the blockchain in 2008, the blockchain has moved from theory to practice, and the application field has expanded from digital currency to specific financial business. From the perspective of the global banking industry, state-owned banks are the forerunners of blockchain technology applications, but compared with Europe and the United States, the large-scale domestic banks have to improve their basic R&D investment in blockchain. Domestic banking blockchain applications focus on supply chain finance and bill business. In the future, the domestic banking industry should actively embrace new technologies and grasp new opportunities for blockchain development from the aspects of practicing internal strength, rational and objective selection of scenarios, increasing investment in research and development, and inspiring and attracting talents.

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Large banks are not investing enough in basic R&D

Compared with Europe and the United States, large domestic banks have to improve their R&D investment in blockchain.

In January of this year, the CCB Research Institute and the Development Research Center of the State Council jointly conducted research and evaluation on the financial technology activity of global systemically important banks. In terms of impact capabilities, Goldman Sachs' blockchain heat is the highest among global systemically important banks, followed by JPMorgan Chase, and Barclays, Bank of China and Bank of America in the third echelon. From the perspective of investment capacity, large and medium-sized banks in Europe and the United States equity investment financial technology companies are more focused on the underlying technology. Among them, the large-scale banking investment blockchain technology service category in Europe is the most concentrated. The large-scale bank investment financial technology companies in the United States are characterized by “multiple and complete”, mainly focusing on payment, financial infrastructure and software services, and blockchain technology. Service classes and big data analysis classes. Goldman Sachs and Citibank invested the most.

Although the application of blockchain in domestic banks continues to expand, compared with foreign banks, domestic bank blockchain technology investment mainly through internal self-study rather than outsourcing, and focuses on business scenario application and solving existing business pain points. In addition, insufficient investment in basic research and development.

Banking blockchain application has a new layout

State-owned large banks are pioneers in the application of blockchain technology. According to the "China Commercial Bank Digital Transformation Survey Report" jointly published by the Internet Finance Association and Xinhua News Agency in 2019, Internet banking and state-owned large commercial banks are more active in the application of blockchain technology. State-owned banks have promoted blockchain applications earlier and have more types of business; Internet banks and joint-stock banks have achieved fruitful results in platform construction.

Domestic banking blockchain applications focus on supply chain finance and bill business. According to data from the China Internet Society, the business scenarios in which domestic banks apply blockchain technology are supply chain finance, bill business, trade finance, payment settlement, microfinance, credit evaluation, etc., while in currency and foreign exchange, wealth management. And the rural financial sector is hardly involved. The whole can be summarized as three major businesses: cross-border business, asset business and intermediary business.

The first is cross-border business. In the field of cross-border payment, 16 core banks such as Bank of China and ICBC have joined the global payment innovation project SWIFT gpi to comprehensively improve the new standards for cross-border bank payment. In the field of international trade, Minsheng and CITIC Bank have cooperated to build a domestic letter of credit information transmission system (BCLC) based on blockchain technology to solve the problems of mutual trust and electronic data transmission between the two parties; CCB explores domestic Forfeiting and international Factoring business to improve the liquidity of trade finance.

The second is asset business. In the field of supply chain finance, ABC launched the “E-chain loan” platform to provide complete e-commerce financing services to corporate clients of the e-commerce supply chain. In the field of serving the people's livelihood, the Bank of China docked “Digital Xiong An”, used the blockchain to participate in land compensation in the new district, and distributed compensation for temporary land occupation. In the field of online loan financing, Weizhong Bank has developed a joint loan reserve fund management and reconciliation platform based on the alliance chain, which can be used for the settlement and liquidation of the “micro-loan” joint loans of the two banks.

The third is the intermediary business. Regarding the digital ticket trading platform, Zheshang Bank launched a mobile digital money order to store and trade money orders in the form of digital assets. With regard to the comprehensive financial platform, ICBC develops a self-controllable blockchain platform for supply chain finance, traceability traceability, asset trading and regulatory auditing. With regard to retail banking, Everbright Bank and China UnionPay cooperated to develop blockchain electronic sign-off system to explore the alliance chain based entirely on the Internet environment; Jiangsu Bank launched the “Su Yindou” integral blockchain system, focusing on bank point marketing.

Actively embrace the blockchain should have a new role

There is still a long way to go before the blockchain is going to large-scale application. In the process, there will still be several challenges. The state-owned banks, which are the mainstay of the national economy, have a lot to offer.

Practice internal strength and lay the foundation for a wider range of applications. Blockchain technology must be based on the participation and sharing of a large number of groups to achieve value, and closed systems cannot take advantage of blockchain. It is recommended that commercial banks focus on the customer center to improve customer experience and improve product market competitiveness; grasp the main line of data, establish a sound data governance system, unify data standards, improve data asset quality, and create a good environment for blockchain technology application. ,Lay a solid foundation.

Rational and objective, targeted business scenarios. It can be foreseen that the application of the blockchain technology in the financial industry mainly solves the problem of painful points such as expensive and time-consuming in the confirmation and delivery of the original business transaction, inefficient participation in the cross-subject authentication, and high repetitive workload of some businesses. However, there is currently no blockchain technology agreement or alliance covering major commercial banks, and systems developed between different banks do not recognize each other. In view of this, it is recommended that the banking industry can select individual business scenarios as pilots based on the actual development of its own business, and gradually promote its application after market development, technical conditions and regulatory policies are mature.

Increase investment and attach importance to the research and development of the underlying technology. Although the blockchain will not have significant results in the short term, it will be the infrastructure for the operation of various financial markets in 20 or 30 years. Large-scale domestic banks should increase the investment in R&D investment in blockchain technology through equity investment or internal incubation, especially in the case of foreign banks. board.

Innovative incentives, the introduction of retaining high-end composite talents. High-end models that are proficient in emerging technologies and compound talents who understand both technology and business will be the most sought-after scarce resources in the digital transformation of the banking industry in the future. Banks should introduce and retain financial technology elites by building an agile development team to innovate their work methods and establish subsidiaries to establish market-based incentives.

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