Nearly every day, U.S. financial institutions announce projects to better understand the blockchain, often partnering with technology startups. It would be a mistake to think their Japanese counterparts are far behind.
Nomura Research Institute (NRI), a Tokyo, Japan-based provider of consulting services and system solutions, will develop a proof of concept (PoC) for implementing blockchain technology with banking in collaboration with SBI Sumishin Net Bank, Ltd., also Tokyo-based. Assisting them on the technology front is Dragonfly Fintech Pte. Ltd., a Singapore-based fintech technology startup, and Mijin, Japan’s first private block chain.
PoC To Examine Business Scenarios
The PoC will examine business scenarios and validation items, prepare prototype systems based on anticipated business scenarios, and materialize ways to apply blockchain technology for banking. Dragonfly Fintech will provide NRI and SBI Sumishin with the technology necessary to conduct the study. The study will use a combination of “NEM,” a public blockchain developed by Makoto Takemiya, CEO of Dragonfly Fintech, and Mijin.
NRI and SBI Sumishin will create business scenarios where blockchain technology is applied and examine items to be verified, Kazu Yokokawa, head of financial services at the research and technology division at NRI America, told CCN. “Then we will build a test prototype system based on the business scenarios, verify outcomes, and suggest specific ways to apply blockchain technology in banking,” he said.
The study aligns with NRI’s plan to promote open innovation for new ventures, and is one of the first studies to be conducted with an Internet banking firm to independently examine ways to apply blockchain technology to banking infrastructure.
Yokokawa said there is a need for specific planning and strategies on how to apply blockchain technology for banking operations by examining technical challenges and implications for wider applications of the technology.
In October 2015, NRI also initiated a PoC for blockchain technology, focusing on the securities industry. Yokokawa said that study is ongoing and the results will soon be announced.
A Commitment To Open Innovation
“This (new) PoC is a strong example of NRI’s continued commitment to open innovation, through collaborations with various firms, to create new value in the marketplace,” said Minoru Yokote, senior managing director of NRI. “NRI is committed to examining technical challenges of block chain and suggesting ways to apply this technology to the banking industry.”
According to Reuters, the NEM block chain has tools to create digital assets and manage account security with multistage approvals.
NEM, according to its technical reference, has a consensus mechanism called Proof of Importance (PoI) which unlike Proof of Work (PoW) is environmentally sustainable and does not require large-scale computing resources in perpetuity. PoI is also similar to Proof of Stake (PoS) except that it is not solely derived from the size of an account’s balance. It incorporates other behaviors that are considered positive for the holistic economy. It attempts to reward active economy participants at the expense of inactive ones.
Startup Seeks Fintech For Banks
Dragonfly Fintech has been working to provide solutions for banks under the framework of its automated clearing and electronic settlement (ACES) initiative, according to Reuters. ACES seeks to create a low-cost, electronic monetary system for banks, including tools to meet compliance requirements.
As part of ACES, Dragonfly Fintech has been developing block chain solutions for financial institutions based on a patent-pending business method.
According to Reuters, the pilot solution with Dragonfly Fintech, NRI and SBI Sumishin Net Bank will mark a new milestone for blockchain technology by using the Dragonfly Fintech blockchain technology to provide practical financial solutions. This pilot will position all three parties as global leaders in using innovative blockchain technology.
Featured image of Shinjuku business district, Tokyo from Shutterstock and Dragonfly.