China Construction Bank (Asia) Corporation Limited (CCB) and IBM have announced the development of the first blockchain-enabled bancassurance project in Hong Kong. The solution is now under testing with insurance providers and their clients. The participants expect it to become available later this year.
Mr. Guo Zhipeng, Deputy Chief Executive of CCB (Asia) said, “As one of the most active global financial hubs, Hong Kong plays a key role in embracing fintech to drive further development of its banking and finance industries. CCB (Asia) is dedicated to offering a wide array of banking products and services to customers, and we strive to leverage new technologies to bring more products, more choices and better experience to our customers. After the successful launch of this blockchain-enabled bancassurance project, we plan to extend our experience to other insurance partners in order to optimise our overall bancassurance business.”
Bancassurance is an arrangement in which a bank and an insurance company form a partnership so that the insurance company can sell its products to the bank’s client base. When it works such a partnership arrangement is profitable for both participants:
- banks can earn additional revenue by selling insurance products to their customers
- insurance companies expand their customer bases without having to increase their sales forces or pay brokers or insurance agent commissions.
One of the challenges of bancassurance is integration of systems. Delays in data transmission or incomplete information sharing can hinder bancassurance ‘arrangements’. It is not unknown for initially agreeing parties to decide their failure to knit systems together means ending what had seemed so attractive.
Bancassurance, which is sometimes known as ‘allfinanz’, was not legal in the USA until the repeal of the Glass-Steagall Act in 1999. It still has not caught on there. In contrast bancassurance is common in Europe, where the practice has a long history. The global bancassurance market is dominated by banks such as Credit Agricole (France), ABN Amro (Netherlands), BNP Paribas (France) and ING (Netherlands). In the UK it has a largely failed or been subsumed. Deals involving the likes of ING, Credit Suisse and the Royal Bank of Scotland fell apart. Lloyds owns Scottish Widows, in effect bringing bancassurance in-house.
In Asia there is more interest. In December of 2015, Allianz and Philippine National Bank formed a joint venture. This provides Allianz with access to over 600 commercial bank branches and 4 million Filipino customers. Allegedly AXA and Allianz pursued Standard Chartered for its multi-country customer base. This CCB initiative adds another instance.
CCB and the technology base
IBM’s Blockchain knowledge underpins this project. Built on the IBM Blockchain Platform, the intention is to:
- streamline CCB’s bancassurance processes
- improve CCB’s customers’ experiences
- deliver faster transaction processing time and increased transparency.
The IBM Blockchain exploits the increasingly broad Linux Foundation Hyperledger Fabric version 1.0. Hyperledger Fabric is a framework for distributed ledger solutions on permissioned networks. Its modular architecture seeks to maximize confidentiality, resilience, flexibility, and scalability of blockchain solutions. It possesses a design which can support pluggable implementations of different components. This is deliberate, because the objective is to accommodate the complexity and intricacies which exist when multiple systems (and organisations) wish to interwork.
What does this mean
According to Mr. Francis Ngai, general manager at IBM Hong Kong: “Blockchain enables businesses to transact with less friction and more trust. Working with local clients and partners across the insurance industry ecosystem, IBM helps businesses digitize transactions, bring a fundamental change in time and cost. In working with CCB (Asia) and the partner insurers, we have seen how the technology is disrupting traditional business processes. This work sets a standard for local banking and financial institutions in the future.”
By working with IBM, CCB and all parties on the blockchain will have a shared view of required policy data in real-time. The aim is to reduce the time consumed making status checks which, in turn, can delay processing. The shared, immutable ledger will recording all transactions. This will establish accountability and transparency among network participants. It will enable CCB and its partner insurers to deliver services.
Bancassurance is not new. The question remains open as to whether blockchain technology will assist in overcoming the traditional system and data integration issues often associated with this composite industry.