UnionBank, Philippines biggest bank to comes in association with US-based blockchain software technology company ConsenSys to assist the local financial institution to integrate with Ethereum and blockchain-based technology. This is how banking institutions in the Philippines are trying to modernize their financial sector, that way increasing its chances of mass adoption.
The Philippines has a unique financial infrastructure around it, which has been dominated by remittances for a longer period now. The banking facilities are mostly been used by the upper class and high net worth individuals because of its requirement to maintain a minimum balance. Most of the business person and individuals from rural part still depend on local remittance network and outlets such as M Lhuillier, Cebuana Lhuillier, Palawan, and LBO to send and receive payment both domestically and overseas.
Remittance outlets are more readily accessible in rural parts of Philippine compare to any other financial institutions because banks find it less feasible to start in less populated areas. In addition to this, maintaining base balance in the accounts is the main reason for banks to fail in reaching to masses. UnionBank, for instance, requires its account holders to maintain a default balance of $2,000 and failure to maintain this required balance can result in penalties.
In such remittance-focused country like Philippine, any technological advance which can provide security, feasibility, transparency, and accessibility is welcomed.
Justo Ortiz, the chairman of UnionBank, stated that the blockchain could “crack the hole of financial inclusivity,” if implemented and commercialized appropriately.
In upcoming months, ConsenSys will closely work with UnionBank to implement, Kaleido, an enterprise blockchain working on top on Ethereum blockchain protocol, processing transaction, and information in most efficient manner.
Both ConsenSys and UnionBank believe this new tech carries to potential to work in favor of financial inclusion to involve local residents of such remittance centered society.
Vitalik Buterin’s Views On Cost Efficiency
While speaking in the Deconomy 2018 blockchain conference in Seoul, Ethereum founder Vitalik Buterin, who has worked with different projects on innovative scaling solutions like Sharding and Plasma to improve the scalability of Ethereum protocol based platforms, stated that cost of processing information on blockchain is considerably higher than centralized systems like Amazon Web Servers.
“Blockchains by themselves are a far less efficient computer and database than technology that has existed for 40 years. If you want to talk about what blockchains are for, the answer is not simple raw efficiency. If you look at Amazon EC2 pricing, the cost of this is about $0.04 per hour.
How much does it cost to make the Ethereum world computer to do stuff for you? Every Ethereum block, which comes every 14 seconds, on average takes about 200 milliseconds for my laptop seconds to process. A block has a million gas and let’s assume the average gas price of 4 GWEI. The cost of filling up an Ethereum block is $13.4 per 200 milliseconds,” said Buterin, stressing that using Ethereum supercomputer will overhead cost by a factor of 1 million.
Hence, UnionBank including five other banks in the Philippines that are planning to utilize blockchain to process a transaction has to considerate that blockchain isn’t the most efficient tech to process information.