Ant Financial intends to launch its proprietary blockchain technology as a “blockchain-as-a-service” this summer, says Hu Danqing, head of the company’s blockchain product development.
The company’s first customer will be Kweichow Moutai, the high-end spirits manufacturer, but it has also been tested domestically with an insurance company and will be applied to financial services.
Hu didn’t elucidate financial use cases but told DigFin that trade and supply-chain finance are “interesting” because they involve the need to instill trust among a large number of entities.
“Trust can not go beyond two or three hops,” he said of the status quo in trade finance, referring to degrees of separation among counterparties. “Can we use blockchain to get more institutions to collaborate?”
Ant Financial’s strategy outside of China is to work with companies in parent Alibaba’s ecosystem, letting them bring it potential use cases for Ant technology. Other than Hong Kong, where Alipay is revving up a business, Ant is not attempting to compete directly. Rather it will use its technology to support local partners in which it has a stake, such as Lazada in Indonesia or Paytm in India – leaving regulatory and licensing issues to them.
Ant has developed its blockchain to fit somewhere between R3’s Corda and Hyperledger’s Fabric, while trying to outperform them all. Hu says Corda is just for financial institutions, while Fabric tries to be all things to all people. Ant’s blockchain is targeted at a middle level of applicability, with its partners in mind. “It’s a driving force for technology challenges that haven’t been solved,” Hu said.
Its closest equivalent is Ethereum, with a similar smart contract capability, but Ant’s blockchain is permissioned, not public.
And, more dramatically, Ant claims it has made much greater progress on performance. Hu says the company’s blockchain now processes 25,000 transactions per second, versus 1,000 TPS for Fabric, the IBM-backed project under the Hyperledger governance model. Ethereum is still around a mere 20 TPS.
Ethereum developers are focused on this problem and are using techniques such as sharding to boost performance. (Sharding is a way of splitting the processing of transactions among nodes, rather than having each node be responsible for validating each trade.)
But Hu says that although Ant has incorporated some of these techniques, its secret sauce lies in its algorithms. “Our approach is to maximize the utilization of I/O [inputs and outputs, i.e., the throughput of the network] and computing resources.”
Consensus, the process by which nodes validate blocks of information, is a process of rounds of computations. Ant’s engineers have found computational rules (algos) that, when unleashed on Aliyun, the group’s proprietary cloud computer, reach consensus much faster than others.
Work in progress
Hu says several challenges remain when it comes to blockchain technology. Performance is good but has a ways to go.
The second challenge is privacy. The nature of pure blockchain is that nodes validate information, which means everyone on the network sees the underlying data. This is not good for encouraging trust. Ant’s approach is not to segregate which nodes can validate a given transaction, but to have a broader, more universal notion of privacy. Hu says Ant prefers to operate on the basis of use-case by use-case, and add privacy functions such as zero-knowledge proofs if that’s appropriate to what users want. (A zero-knowledge proof is a protocol allowing one party to confirm she can validate a block of data without actually seeing the underlying, sensitive information.)
The third, and biggest, challenge is what Hu calls “anchoring”. This is using sensors, chips and other devices to map any physical item, or asset, that is not native to the blockchain (which means almost everything).
For example, if Ant wants to use its blockchain to transact exports of milk from Australia to China, it needs to confirm the origin of that milk, so that Chinese consumers trust it’s the real McCoy. Putting a chip on a cow in Australia is the starting process, but the hard part comes in tracking the milk once it leaves the udder. The same principle applies to purely financial transactions.
The simplest solution would be encrypt/decrypt protocols, but regulators don’t always allow this. China’s government may not allow the storage of encrypted information regarding Chinese citizens outside the country; the European Union also has strict rules such as the right to be forgotten, which complicate the immutable nature of distributed ledgers.
Hu says he’s looking at outside examples to help figure out solutions. One is Singapore’s Project Ubin, a competition among Corda, Fabric and Ethereum Enterprise Alliance to develop a payments method via blockchain. “They are solving the anchor problem by incorporating MAS as the anchor,” Hu said, referencing inclusion of MAS on the ledgers as an all-seeing supervisor. But solutions are a work in progress: “There is no universal scheme for privacy on a blockchain.”
Digital payments to the fore in Singapore
Google Pay, NETS, SmartStream and MasterCard announce new efforts at Singapore Fintech Festival.
One of the biggest themes at the Singapore Fintech Festival is digital payments. It’s a field full of innovation from fintechs, Big Tech, and lenders. DigFin presents some of the biggest announcements.
ATM for rides
NETS Group runs Singapore’s payment rails. The company has a track record of innovating: it was the first in Asia to adopt an electronic debit network, even while global payment companies like Visa and Mastercard still relied on franking. (Franking is referring to postal stamps to confirm a payment was sent by mail.) Other “firsts” followed.
Today the company is now helping Singaporeans use their bank debit and credit cards to pay for transportation, says Jeffrey Goh, group CEO. It has just introduced NetsClick, the first ATM card tokenized for taxi rides, with the user’s bank account debited for the journey. And it just followed this up with allowing bank customers to use contactless ATM cards to pay for rides on the city’s MRT subway system.
OCBC partners with Google
OCBC Bank has entered a partnership with Google to reintroduce the Google Pay app to Singapore. Starting in January 2020, OCBC customers will be able to make C2C or C2B transfers between mobile phones using Google Pay.
Bank customers won’t need an electronic wallet to make mobile payments, says Ching Wei Hong, the bank’s COO. The bank is using the partnership to boost users of Singapore’s new PayNow digital payments network.
Users of Google Pay can also earn rewards when they use it for transferring money or making payments, which go directly to the user’s OCBC bank account.
Google Pay offers a similar feature in India, where it gained rapid adoption on the back of India’s interbank payments system, United Payments Interface (UPI). PayNow, which went live in Singapore in 2017, is a similar peer-to-peer transfer service. The Association of Banks in Singapore estimates the first half of 2019 saw 28 million PayNow transactions worth S$4.6 billion. With Google Pay now supporting PayNow-based payments, the company expects volumes to grow rapidly.
Adding A.I. to payments
SmartStream Technologies is developing artificial intelligence solutions to improve banks’ digital payments capabilities, says Andreas Burner, chief innovation officer.
The technology company is applying machine learning and neural networks to identifying patterns in the data that banks already possess. Banks hold the lion’s share of customer data, and SmartStream is helping them access it and make sense of it.
Digital payments solutions enable acquirers, card networks, issuers, gateways, ISOs and others to get a holistic view of their payments. “Our innovation lab is working with banks to understand how to apply machine-learning tools to payments innovations,” Burner said. “Volume, velocity and variation in digital payments is changing at an unprecedented rate.”
The company has established a dedicated practice to collaborate with all participants in a client’s digital payments world, creating innovation solutions to bridge the gaps in the areas that matter to end users – and to build models that can handle exceptions workflows that kick in when a payment fails or doesn’t go as planned.
All aboard the express
Mastercard has launched Fintech Express, a program to work with third-party fintechs to support them as they help grow the digital payments world, says Rama Sridhar, executive vice president for regional digital partnerships and new payment flows. Mastercard’s first partner is Rapyd, a fintech that uses APIs to provide customized payment solutions to regional and global e-commerce companies, among other corporations.
The partnership gives Rapyd access to Mastercard’s product, partnerships, licensing and legal teams, and helps Mastercard service Rapyd’s corporate clientele. This gives the fintech fast licensing as a card issuer, integration into the Mastercard network, and advice. Rapyd will be able to quickly issue cards for its corporate clients in Asia Pacific. Mastercard hopes its Fintech Express platform will attract more payment-oriented fintechs.
MAS: make fintech sustainable
Data localization, reconciliation and open APIs leading themes at Singapore Fintech Festival’s first day.
The Monetary Authority of Singapore uses its humungous Singapore Fintech Festival (SFF) to drive the government’s agenda. And because of Singapore’s pole position in the industry, and the scale of its conference extravaganza, the MAS can use the event to shape its message.
And its message this year is sustainability. “We need to make the world greener,” said MAS managing director Ravi Menon. And that means a greener financial system, he said.
Data governance doubts
While Singapore’s government pushed green fintech, bank CEOs expressed concern about data and how it’s being regulated in some countries. Noel Quinn, CEO at HSBC, said local laws requiring customer data to remain within the country put at risk the global services that financial institutions are trying to create to serve financial inclusion goals.
Bill Winters, CEO of Standard Chartered, said storing data in local countries wasn’t a problem, but when the data can’t be transmitted abroad, it undercuts cloud computing and global data analytics.
DBS chief executive Piyush Gupta noted that such barriers obstruct progress in KYC, AML and other security requirements – although he also noted that governments and policymakers in some markets realize their localization laws need to be updated.
Companies used SFF to announce new initiatives. One of the areas that fintech has struggled to reach is reconciliations in payments and securities – a huge goal across the industry because of the intensely manual nature of such work. SmartStream Technologies used the exhibition to promote a new product, SmartStream Air, which uses artificial intelligence to carry out reconciliations in almost real time, by comparing and matching data, highlighting any disputes.
DBS Bank, for example, is using SmartStream products to bolster the digitalization of its institutional and trade-finance business, said Raof Latiff, managing director for the institutional banking group. Streamlining its operational workflows allows DBS to focus on new innovations for its customers.
Open banking options
Another major topic at the event was open banking, and open APIs. The rise of digital banking has given way to a need for open banking, said Francesco Simoneschi, co-founder of London-based fintech TrueLayer, which provides verification tools. Banks will begin to use APIs to communicate with other players in order to be able to verify customer identities, rather than rely on people providing bank statements – particularly in developing markets.
“Digital identity is the holy grail,” said Michael Tang, leader of global financial digital services at Deloitte. But financial institutions engaging in open banking will need to ensure trust, which requires a business model that values the customer, instead of seeking to take advantage of their data.
Banks seeking data insight turning to gini enterprise
The trend of open API is making it easier for fintechs to deliver data-based solutions to banks and lenders.
Banks and other financial institutions possess a wealth of historical data about their customers but are struggling to convert that into ways to generate new revenues. As the trend of “open API” sweeps Asia, some banks view it as a threat to their operating models. But commonly used APIs might also be the key to helping banks unlock the value of their data.
Pioneering fintech companies such as Hong Kong’s gini enterprise have developed solutions to help commercial banks, credit card companies and other lenders turn data into insight – and insight into action.
“Banks struggle to understand the information they have on their customers, and we help them make the right decisions and create the right products that their customers want,” said Ray Wyand, CEO and co-founder at gini.
The company began three years ago as a consumer-facing business, offering individual users of its app a holistic look at their finances, from savings to spending, across financial institutions and merchants.
It has developed the technology behind this to help banks and lenders derive the same insights. While banks may have plenty of historical data about their customers, until now they have been flying blind in terms of seeing a customer’s entire portfolio or behavior.
First gini acquires transaction data and “cleans” it, eliminating errors, and “enriches” it, making it machine-readable. That data is now being turned into analytics and use cases for banks that need to either reduce their operating costs, or generate new revenues.
We help banks make the right products that their customers wantRay Wyand, gini enterprise
One of the earliest benefits gini is delivering is removing costs from chargebacks. In Hong Kong, over 10% of calls to banks’ call centers involve questions about card transactions at venues that people do not recognize. This is because many merchants operate under confusing holding-company names.
This may sound simple, but each investigation costs banks on average around US$100, which adds up to tens of millions of dollars, for every one million customers, over a year. However, gini’s data includes geolocation, enabling it to map venues to corporate names – and even to identify individual stores among chains, which are often impossible for banks to figure out. Such data insights not only save banks money on investigations, but also reduce the number of incoming calls.
“If you give us the raw data, we can clean it, structure it, enrich it, and tag it, so our clients can build a set of structured data,” said gini enterprise COO and co-founder Victor Lang. “That’s the first step for a bank looking to use machine learning and AI to improve customer experience and lower operational costs.”
Helping banks grow revenue
The same kind of structured data can also be used to make money, not just save it. One of the biggest demands among banks is to personalize rewards and offers, delivering the right product to the right customer at the right time.
To date, banks have relied on their proprietary demographic information to come up with new product offers, which tend to be one-size-fits-all pitches. Gini augments this with behavioral data built from many sources, a process far more complex than merely “scraping” information from websites used by a customer.
If you give us the raw data, we can clean it, enrich it, structure it, and tag itVictor Lang, gini enterprise
For banks to be able to leverage more data better, the advent of open API is a game-changer.
Harnessing open APIs
APIs, or applied programming interfaces, have been around for a long time: they are the bits of code that let two software programs talk to each other. APIs power every app. “Open” means these are developed in an open-source environment, making the sharing of data a two-way street. Indeed, more banking regulators are mandating that (with consent) consumer data be shareable among banks, merchants and the customers themselves.
For banks used to serving as guardians of customer information, open API is a scary prospect. In many cases, they do not want to share their data. However, gini allows them to work with third-party data without necessarily having to give away their own.
Because gini works with so many sources to enrich the data, it can deliver insights that no bank or lender could derive on their own. A financial institution can work through gini to access the data from, say, an e-commerce site or a merchant, and develop new products for those customers. And as banks become more comfortable with data exchange, they will begin to embrace the greater value from open API collaborations.
Even better, companies like gini don’t need to see any personal identifying information (PII) in order to deliver this kind of insight to banks. Gini doesn’t know who a given customer is: the company just knows that this app user has a certain profile that can be categorized.
“Acquiring and analyzing this data fits with our mission to make anyone in the world great at managing their finances,” said Lang. Now gini enterprise is partnering with banks and lenders to power them with similar insight.