Banking and beyond with blockchain

Asia’s digitisation story is one of leaps and bounds. The speed at which new technologies are embraced and developed into use cases is significant – with one of the most noticeable areas being payments and transactions more broadly. A stark example was in 2023 when the Monetary Authority of Singapore announced that all corporate cheques will be done away with by end-2025.¹ Similarly, as e-commerce continues to skyrocket in the region the demand for digital solutions to support this is also growing.

This is where blockchain technology continues to promise unique opportunities. By opening up the possibilities around tokenisation as well as more secure and transparent transactions, it has the potential to shape the future of Asia’s digital economies.

For many businesses, especially during the Covid-19 years, digitisation was accelerated by necessity. Fragmented workflows, opaque processes, bottlenecks caused by physical documentation were a few of the gaps in the status quo that digitisation was identified to overcome.

But it’s not just internal processes that were to benefit. As one example, companies managing supply chains across Asia have a multitude of parties to manage - vendors, suppliers, etc. – and need a reliable system to track transactions and shipments along the chain. Greater resilience in the form of transparency and traceability is for this reason a distinct advantage of digital supply chain management.²

As the technology evolved, the conversation around blockchain as the key to unlocking many of these benefits gained momentum. By promising a more trustworthy infrastructure for managing business operations, there’s been significant growth in use cases for this technology.

At the heart of the benefits of blockchain implementation are an increase in speed and more efficient transactions. A good example are smart contracts, which automate processes and keep track of a business’s diverse workflows – a significant benefit as companies look to engage their workforces in higher order activities.

For our part at HSBC, we see collaboration as key to effective blockchain implementation. For example, we launched a pilot with a real estate partner in Singapore, exploring how blockchain could enable the completion of claim submissions, negotiations, and payments on a single platform.

This made the process more secure, while also streamlining payment turnaround times by moving from paper-based processes to electronic transfers. It also had the effect of improving visibility on transactions as blockchain enables the implementation of a track and trace feature, improving vendor visibility and relations.

Alongside the gains in efficiency and automation is the potential of blockchain for financial inclusion and tokenisation. This is particularly relevant in Asia with its diversity of markets as well as large underbanked community across the region.³

Public and private institutions are looking for ways to improve financial inclusion in rural areas and among currently excluded demographics. Tokenisation, which is a digital representation of a physical asset, is being explored as a way to open up asset classes and investment opportunities previously unavailable to underbanked users – an area where blockchain would play a key role.

Banks such as HSBC have been exploring ways to overcome the multidimensional challenges facing the underbanked by leaning into Asia’s high smartphone penetration rate and impressive number of internet users.⁴ Our own focus areas include:

• Embedding products and services via APIs to help clients fully automate the loan distribution process and increase access banking support.
• Collaborating with partners to help them arrange direct payments to customers with digital wallets but not bank accounts.

Looking ahead, although there remain challenges to the widespread use of blockchain for transactions and other operational use cases, the innovation underway reflects a strong confidence in the value of this technology. Collaboration will continue to play an important part in exploring where and how blockchain can be used, with co-created solutions between stakeholders ensuring mutual benefit.

As Asia’s digital story evolves, blockchain is set to play a central role in the narrative with use cases increasing and the demand for its benefits only set to grow.