KBank introduces world’s first blockchain-based letter of guarantee service
Kasikornbank (KBank) has developed its Letter of Guarantee (L/G) service in the L/G market worth Bt1.35 trillion with the introduction of the world’s first blockchain-based L/Gs. Four state enterprises and private businesses have participated in the development of this innovation, which is aimed at an increase in L/G issuance via electronic channel to 35 per cent at the end of next year.
KBank president, Pipit Aneaknithi, said the blockchain technology is applied to create highly secure networks of document filing and retrieval of the 4.0 era. It has already induced a business turnaround in many industries, via enhancement of documentary efficiency. Taking L/G service as an example – L/Gs in the Thai economy issued by banks are very large in number as state enterprises and large corporations require them to ensure the business reliability of their trade partners.
With the aim of setting a new business standard, KBank has developed a new blockchain network designed to help simplify procedures for the bank’s L/G process, and also tested the service on the Bank of Thailand’s Regulatory Sandbox. In addition, business partners, including the Metropolitan Electricity Authority, Provincial Electricity Authority, PTT Global Chemical PCL. and PTT Polymer Marketing Co Ltd, have participated in the development of “Enterprise Letter of Guarantee on Blockchain” to upgrade their L/G management.
For such state enterprises and large corporations that have many trade partners, all L/Gs deposited by their trade partners will be electronic documents and managed on a common standard through end-to-end paperless processes; they will be highly secure, easy to examine and difficult to forge.
The Enterprise Letter of Guarantee on Blockchain offers six benefits to the business:
1.Security – because the data storage in the blockchain system has the same standard and its status can be verified any time; 2.Speed – document processing can be shortened to just 30 minutes from 24 hours before;
3. Cost reduction – document management expenses can be cut by 50 per cent;
4. Greater efficiency – the business sector can undertake document processing swiftly anywhere, anytime;
5.Centralised database platform;
6.New business opportunities – because it helps businesses move quickly via a single standard data infrastructure.
Pipit added that L/Gs issued via the commercial banking system in Thailand is expected to reach over Bt1.35 trillion, increasing 8 per cent, in 2017. Of that total, some Bt330 billion will be issued by KBank, which would account for the largest share of the market at 25 per cent. Of that, 80 per cent of L/Gs will be issued via KBank branches and 20 per cent via its electronic channels. KBank is targeting an increase in L/G issuance via electronic channel to 35 per cent by the 2018 year-end, 5 per cent of which will be processed via blockchain.
KBank is upbeat that its Enterprise Letter of Guarantee on Blockchain – the first of its kind in the world – will be upgraded into a new international standard, given that blockchain is useful for all parties in the connection system.