Emirates Islamic Bank announced the launch of ‘Cheque Chain,’ an initiative that integrates blockchain technology into cheques to strengthen their authenticity and minimise potential fraud.
As 2017 proceeds, a clearer picture of the true value of blockchain in the financial industry is starting to appear. With areas such as trade finance, cross-border payments, and KYC/AML rising to the top of the list of applications for distributed ledger technology in financial services. As banks look for opportunities to increase efficiency, cut costs and improve customer service, there is also potential for banks to explore new business opportunities, perhaps most notably in the area of identity.
In this context, it is worth highlighting how Emirates Islamic is integrating blockchain technology into cheques. Blockchain has the potential to significantly increase security and protection in banking transactions and ‘Cheque Chain’ initiative will dramatically reduce cheque frauds in the market helping customers with greater peace of mind and security. The launch of “Cheque Chain” comes months after Emirates NBD tested the feature in conjunction with the central bank of the United Arab Emirates.
The bank has planned to introduce the Cheque Chain initiative to its employees during the pilot phase, ahead of the customer roll later this year. The next stage of the Cheque Chain initiative will see the bank register each cheque leaf on its blockchain platform to validate the authenticity of the cheque at its source.
In the first phase of the initiative a unique Quick Response (QR) code will be printed on every leaf of the newly-issued chequebooks, making it difficult to re-create cheques and also to validate the genuineness of the cheque, thereby reducing fraud.
In following phases, the QR code will register each cheque on the bank’s blockchain platform, ensuring that once the cheque is received and cleared under the bank’s ICCS technology, the bank staff will be able to validate the cheque’s authenticity and have access to its source at all times. This will also enable the bank to validate the cheque’s authenticity once it has cleared its Inward Cheque Clearing System.
Additionally, a string of 20 random characters will be added on the MICR (Magnetic ink character recognition) band of the cheque leaf using non-MICR ink.
The detailed timeline of the project is unknown. However, in our view, the Cheque Chain initiative is the beginning of a significant strategy by Emirates bank to integrate blockchain technology into existing products and services, with the objective to implement global-best digital security systems in line with the digitalization of its products, processes and services.
In future, this solution could also involve a blockchain-based registry, a distributed database of verified customer data, which all banks could access. When a customer approaches a new bank to open an account the bank will be able to access their pre-verified information from their node on the blockchain.