As the demand for instant financial services continues to mushroom, the push for financial institutions to increase efficiency will accelerate the adoption of technologies such as blockchain.
Asia-Pacific ex-Japan is certainly stepping up its interest in blockchain technology, according to a recent forecast by market research firm International Data Corporation (IDC), which predicts that during 2022 firms around the region will invest US$2.4 billion in blockchain technology. That represents a significant jump compared to the US$284.8 million ploughed into the technology in 2018 based on IDC data.
Blockchain technology’s ability to instantly validate transactions between various parties underscores its rise to prominence. The technology has been critical in supporting cryptocurrencies such as Bitcoin and facilitating the smooth transfer of information between entities. Financial institutions such as banks and insurance companies are predicted to account for more than half of investments in the emerging technology within the Asia-Pacific ex-Japan region.
In the Asia-Pacific region both governments and banking consortium are already harnessing the technology to speed up traditional processes from days to just hours. For example, last year companies such as furniture and household goods retailer Pricerite were able to send trade finance transactions on eTradeConnect, a blockchain-based trade finance portal facilitated by the Hong Kong Monetary Authority. The platform allows buyers and sellers to exchange and confirm purchase orders and invoices on a need-to-know basis.
The Voltron blockchain consortium of banks powered by R3’s Corda blockchain also turned heads last year when the consortium was able to execute the first digitalized end-to-end letter of credit transaction between Rio Tinto and Cargill for a deal that involved a shipment of iron ore. The letter of credit issuance was completed in less than two hours, highlighting blockchain's substantial timesaving benefits, especially when compared to the one to two days for traditional paper-based letters of credit.
Blockchain is even making its presence felt within financial payments in Asia, particularly when it comes to cross-border payments. In a bid to promote the ability to make transfers between Hong Kong and the Philippines, AlipayHK and GCash established a partnership that allows for funds to be transferred between each other’s mobile wallets by harnessing blockchain technology as the underlying transaction verifier.
However, despite the recent upsurge in blockchain adoption, Asia-Pacific ex-Japan still lags behind Western Europe and the United States in terms of levels of investment.