In his recent return to Vietnam for a blockchain conference, Dr. Ly Van Bao has a talk about the trend of European and international banks in this application to the banking and financial services and about his dream of starting a business using this technology.
Dr. Ly Van Bao (photo: NVCC)
Having completed his doctorate in Information Technology at the age of 28 in France in 2005, Dr. Ly Van Bao decided to stay there as an independent technology consultant in the finance and banking industry. Over the next twelve years, he undertook many key roles in major projects in building and restructuring the information technology systems at well-known multinational banks in France such as BNP Paribas, HSBC, AXA … Currently, Dr. Bao is a design architect, coordinator and developer of e-Commerce applications used in the purchase of derivative products from BNP Paribas, one of 10 largest banks in the world. This is part of BNP’s overall program named “Investment Bank of the Future” and “ Digital Era” with a total investment of over $3billion.
How do European and world banks approach blockchain, one of the most popular technologies today?
According to the global report on Fintech by PWC, 82% of financial institutions around the globe are increasingly engaged in developing their Fintech counterparts to make more technological applications., 30% of large financial institutions are investing in the use of artificial intelligence (AI) and 77% of them are setting the goal of blockchain application in their product system and operating procedures by 2020. This means that there is less than two years to put these technologies into practice. Banks and financial systems are starting to sprint into the blockchain application, since its successful application is synonymous with cost cutting, security improvement as well as transparency enhancing in the current banking system.
Specifically, what can blockchain contribute to the banking and financial services?
It can be said that this field is one of those where blockchain can be applied most successfully. For example, estimating the amount invested by global banks in the anti-money laundering (AML) and illicit activities alone, according to Deloitte’s calculations, it already exceeds $10 billion. This figure is constantly increasing every year due to the increasingly complex nature of the problem. This is one of the major burdens of the banks and it certainly increases the transaction costs. Besides, the application of Know Your Customer (KYC) policy requires the financial institutions to know and understand their customers as well as their financial transactions for risk management, which is another burden to all banks, even major banks like BNP Paribas or HSBC where I have worked with. The KYC compliance requirements often slow down the transactions, especially the complex ones which may last several business days..
Although the sharing of customers’ information has been implemented, for example, SWIFT (Association of inter-bank telecommunications and international finance) has shared information about KYC with only 1,125 members. This figure is too small as compared to more than 7,000 banks in the SWIFT system. Thus, blockchain application into customer information management will bring more efficiency.
For the regulation of cash flow, if we get the right approaches, blockchain will be the most optimal technology in solving its problem because once information is stored, it will last forever and no modification can be made. Therefore, malicious individuals should avoid blockchain applications because whatever way of creating fraud, the investigators can find a lot of clues. Thus, it’s better than any current technologies by allowing the examination into the past data.
Furthermore, blockchain can be used to build a payment system, a money transfer system or a digital identity recognition in banking transactions and financial services.
Dr. Ly Van Bao (top left) and Mr. Kai Yee Goh, former Director of Western Union International Business Development
So what are your comments on Vietnamese approach to blockchain technology and digital money?
As a technology expert in the financial sector, I think the current perspective to digital money in Vietnam is disallowance for use in transactions and considering it as an asset, which is regarded as the prudent and necessary steps before specific legal corridors on this issue are promulgated. However, blockchain technology including the digital money application, similar to any other technologies in the digital era, has a rocketing speed of development. If we do not respond in time, we will go behind other countries. One lively example I’ve seen when attending the blockchain conference held by Huobi, a Singaporean company, in Ho Chi Minh City, is that Singapore government has successful policies in both controlling and creating the legal corridors so that this island has gradually become a center for blockchain technology and digital money in Asia. Singaporean current position challenges any country in the region to catch up with.
Moreover, the effectiveness of blockchain application in the banking and finance sector is the transaction cost cutting. This means increasing trade advantage, especially the international trade, considering that the bank charges are always a burden to all businesses. Obviously, the strength of national competitiveness in the international trade will be influenced by applications related to blockchain and digital money in the near future.
So you want to start a business with a blockchain application?
Working with leading banks in Europe in many IT projects involving different operations, I have an overview of blockchain application trend in this area and I think it will be an inevitable one. Now it’s time when I can bring my experience and knowledge of technology to create a product that benefits the community, especially those with low incomes.
My colleagues in the financial services with me together will build an application called ZeroBank, a smart application developed for transactions of noncommercial money transfer, from peer to peer, directly and rapidly cross-country. Utilizing the latest technologies such as blockchain, smart contract combined with the sharing economy models, ZeroBank completely eliminates the common barriers of conventional cross-country money transactions and promises to be a major threshold in international money transfer.
Through ZeroBank, the senders and receivers can perform direct, peer-to-peer transactions at any time, anywhere, with the lowest cost by eliminating the dependence on the financial intermediaries with high cost as in banks or international money transferring organizations.
ZeroBank aims to serve 258 million people, including international students, migrants, foreign workers across the globe and more than 1.3 billion travellers per year. In addition, ZeroBank also creates a platform combining the sharing economy to provide work opportunities for the community such as taxi drivers, tour guides, hotel receptionists, salespeople, students … Blockchain technology combined with the sharing economy is one of the key points to make the project feasible.
This will be a global project developed in Vietnam. It is possible that ZeroBank is one of the most ambitious projects I have ever participated in, but with my experience and trust in my experienced partners in the field of money transfer and exchange, I believe we will go far.
“The legal basis always lags behind technology because its fast-changing nature. Sometimes big change will have to be made in a short period of six months to a year only. I think that the law is made to help create the legal corridors for technological development rather than prevention. Thus, the time will come when the legal basis in Vietnam gradually creates the corridor as an environment for development of applications beneficial for the society, the community and most importantly, to the economy. However, we cannot wait for a legal framework then implement technology since if so, no legal framework for technology will exist. “ Dr. Ly Van Bao says.