Dubai kicks off blockchain banking services

Emirates NBD Future Lab has undertaken the pilot project in blockchain banking.

Emirates NBD became the first lender in the UAE to launch a pilot blockchain network for services, including international remittances and open account trade finance.

Shaikh Ahmed bin Saeed Al Maktoum, Chairman of Emirates NBD, the UAE's largest bank, announced the bank's move in partnership with ICICI Bank of India.

The initiative, a first for a private sector entity in the UAE, came within days after Shaikh Hamdan bin Mohammed bin Rashid Al Maktoum, Crown Prince of Dubai, announced a plan that would see all government documents secured on a blockchain by 2020, a move that has the potential to generate 25.1 million hours of economic productivity each year in savings, while reducing carbon emissions.

In theory, blockchain technology, which is also known as distributed ledger, allows a bank to track every fils along every step of its journey for every transaction in real time.

The blockchain's decentralised, immutable ledger can permanently log modifications to a network or database, preventing intruders from covering their tracks.

With blockchain, all the parties - importers, exporters and banks - can view the data in real time. It helps track documents, digitally authenticate ownership of assets on unalterable ledger and execute transactions through encrypted and secure digital contracts. With no manual intervention, the automated process allows courier of paper documents across countries and verification through trade intermediaries.

Overseas remittances for retail customers at lower costs are also possible with the new technology in real time. Currently, international remittances take a few hours to up to two days.

Shaikh Ahmed announced that the bank is currently engaged with conducting trials of the blockchain technology across multiple banking and payment services. The use case scenarios range from customer-facing and government transactions to internal systems to harness blockchain's potential to simplify, secure and automate business processes.

"Our pilot project, a first for the banking sector in the UAE, demonstrates blockchain's immense potential to change how organisations and governments conduct business. We look forward to further collaboration with the public sector and our private peers to further adopt this technology in the UAE," said Shaikh Ahmed.

"We anticipate blockchain to be a potential game changer in creating a secure, scalable, cost and time-efficient digital ecosystem for government and businesses. As a bank that has pioneered digital innovation in banking and payments in the UAE, we are excited to take the lead in testing future applications of this technology in the banking sector," said Shaikh Ahmed.
Emirates NBD Future Lab, the bank's innovation-driven platform that seeks to partner with FinTech innovators to create pioneering banking and payment solutions, undertook the pilot project.
The pilot project demonstrated how banks could significantly reduce transaction costs and time. The trade finance purchase order and invoice financing cycle tests conducted showed a near real-time transfer of invoices and purchase orders in a transparent and secure manner. The blockchain network was integrated with the Infosys Finacle core banking and other host systems within the pilot technology environments on both banks and was designed to be least disruptive to existing systems and processes, allowing the banks to seamlessly plug in their systems and process to work with blockchain technology.
The project was executed using an Infosys solution, EdgeVerve Blockchain Framework, a ledger designed specifically for the banking sector that can scale up to experiment several business use cases. Blockchain-based applications built on the framework can deliver increased efficiencies, transactional security and accuracy at a lower cost. Meanwhile, a group of Dubai government officials and businessmen said they were close to obtaining regulatory approval to create the world's first fully Shariah-compliant bank devoted to trade finance.
The founding committee is in advanced discussions with the UAE Central Bank to obtain an Islamic wholesale banking licence, the Dubai Islamic Economy Development Centre said on Wednesday.
Emirates Trade Bank will specialise in international trade and commodity financing, the centre said, without giving details of the new institution's structure or financial backing.
- issacjohn@khaleejtimes.com

Issac John

issacjohn@khaleejtimes.com