Fintech companies are threatening traditional banks to such an extent that banks are now embracing the blockchain to offer low-cost services.
Introducing the Blockchain to Remain Relevant
U.K.-based bank HSBC and Mizuho Bank, one of the largest financial services companies in Japan, are among 12 banks that are turning to blockchain technology.
According to a report from the Nikkei Asian Review, the decision to embrace the blockchain follows increasing tourism and trade in Asia. In about a year, the technology could be ready to digitize trade in Asia. This could see transaction times cut from five to 10 days down to 24 hours, states HSBC.
Japan and Singapore are two countries that are already working together to deliver great fintech between them. By working on joint projects, the two are aiming to boost the industry in both countries. The projects and initiatives are designed to support fintech innovation and development.
At present, domestic transfers in Japan are made through the Zengin system. This records cash movements in and out of banks. Notably, though, some Japanese banks, such as Resona Bank and Suruga Bank, are working to bypass Zengin to reduce the risk of getting left behind as more efficient fintech companies enter the space.
Even though Zengin is reliable, it’s also expensive. Not only that, but fund transfers not involving banks have risen in Japan. Since 2010, fintech companies have conducted transfers of up to one million yen, the report notes. As a result, banks are forced to look for alternatives to remain relevant.
Remittance Payments on the Rise
Another factor to take into account is remittances.
Sending money from one country to another comes with a high charge. Additionally, it can take up to four days to arrive in the recipient’s bank account.
In a bid to answer these issues, steps are being made. Last month, SBI Remit, a Japanese bank, revealed that it was enabling half a million customers to send money to Africa with Bitcoin. It announced it was teaming up with Kenya-based BitPesa, a digital foreign exchange, to enable the transfers to take place.
With remittance payments through banks slowing down, traditional institutions are being forced to rethink their methods. Even though banks may not be keen on Bitcoin, the use of the blockchain is providing the solution they need.
Do you think the blockchain will help banks to stay relevant? Let us know in the comments below.
Images courtesy of Shutterstock.