In an effort to embrace technology as a lender, National Bank of Abu Dhabi has become the first bank in the Middle East and North Africa to introduce real time, cross-border payments on blockchain.
The bank has formed a partnership with Ripple, a US start-up specializing in blockchain technology.
Blockchain technology involves digital currency bitcoin to help banks speed up their dealings with one another.
Blockchain works as an electronic transaction-processing and record-keeping system.
It allows parties to track information through a secure network, with no need for third-party verification.
Through the alliance with Ripple, NBAD will enable customers to cut the cost and speed of payments, Arabian Business reported.
Santander, Standard Chartered, and Unicredit are among the other banks that have already partnered with Ripple, which uses blockchain technology.
Standard Chartered is also an investor in the company.
In October, the UAE’s largest lender, Emirates NBD, said it was working with Indian bank ICICI on a pilot project to use blockchain technology for global remittances and trade finance.
Blockchain technologies have the potential to revolutionize the rapidly growing financial services sector in the UAE and broader GCC region, according to a report by consulting and technology firm Booz Allen Hamilton.
The report titled ‘Blockchain: Application to Financial Services in the GCC Region,’ has pointed out how blockchain can impact key areas of finance, including retail payments infrastructure, remittances, forex trading, trade finance, capital markets and compliance activities.
Using math and cryptographic tools, blockchain technology helps create an open and decentralized database of transactions, monetary or otherwise.
This creates a record whose authenticity can be verified by everyone involved in the transaction, effectively allowing institutions like banks to cut transaction costs and time.
Blockchain technology also allows trading parties to track information via a secure network, without the requirement for any third party verification.
The report has also outlined how central banks could lead this initiative by supporting broader issues on regulation, and knowledge sharing, as well as encouraging commercial banks to collaborate with fintech firms to test fresh business models.
The UAE government is working to establish the country as a major financial technology (fintech) player and has already started to experiment with the potential uses of blockchain in the public and private sectors.
The UAE accounts for more than $19 billion of remittances per year, ranking it fourth in the world, according to World Bank data.