TOKYO -- Japan's securities industry is looking earnestly into myriad ways to use blockchain -- the technology underpinning virtual currencies such as bitcoin -- to operate more efficiently, such as by streamlining the processes of opening accounts and digitally settling trades.
Financial services group SBI Holdings will link up with tech giant NEC in an effort to let financial institutions share client identification information via blockchain, allowing customers to skip redundant identity-check processes when opening accounts with new companies. Meanwhile, Daiwa Securities Group will lead an experiment in using the distributed ledger technology to verify trade settlement information such as issue names, share numbers and prices.
If such moves lead to lower costs for securities companies and the like, the benefits could trickle down to clients such as retail investors in the form of lower fees.
The brokerages will use a blockchain testing environment that Japan Exchange Group, the bourse operator, has provided for free to domestic financial institutions since April last year. This will mark the first use of the system conducted with specific target operations in mind.
Some 14 companies, including major brokerages and megabanks, will participate in SBI's trial. The rigmarole of opening an account has made it harder to attract clients, and simplifying setup has become an industry-wide issue. As many as 1.7 million people per year quit partway through setting up an account at online banking and securities companies alone, according to the Fintech Association of Japan. Since last year, opening a securities account has required clients to register with their "My Number" tax and social-security ID, further raising the psychological hurdles.
Daiwa's equities experiment will include 17 financial institutions, mainly major brokerages.
Currently, institutional investors all have their own trading verification systems, and it costs securities companies time and effort to accommodate them. Changing over to a unified blockchain-based system could reportedly slash related costs in half.