South Korean Credit Card Company Launch First Transaction Service Using Blockchain
According to a post released by The Korea Times on July 15, 2019, Shinhan Card Co. Ltd., global top-five credit card company in South Korea, obtained a patent for a blockchain-based payment system. It will be the first company in the world to have established a credit transaction service using blockchain technology.
Blockchain for a New Payment Infrastructure
Shinhan Card, established in 1990, is Korea’s biggest, global top-five credit card company. They are pioneers in the digital payments industry and they introduced the technology of sending virtual one-time card numbers in Visa’s 3-D Secure.
To maintain the top spot in its sector, Shinhan Financial Group’s subsidiary will be the first in the world to have developed a global financial service based on blockchain technology. The service offers the same functionality as a credit card such as setting a maximum spending limit, paying in monthly installments and completing payments between merchants and consumers.
According to the post, the company started a feasibility study including technology reviews a year and a half before the patent was actually received, giving them time to test and prepare the technology ready for world expansion.
A member of the Korean company stated:
“We are seeking measures to make the patent valid in European countries, the U.S., Japan, China, Vietnam, and Indonesia.”
The patent could introduce credit transactions without the need for a physical card. System users can make payments simply by using an app on mobile devices thus reducing costs while also offering better user experience.
This infrastructure would completely revolutionize the traditional credit card system which is based on three intermediaries: credit card firms, a value-added network (VAN) service provider, and a payment gate. In such a system, the VAN service provider connects the credit card company and member stores to verify and approve transactions which will be later processed by the payment gate.
Thanks to blockchain technology this process will be simplified and could be extended to cars or home appliances that would interact by exchanging cryptocurrencies according to preset limits. This application exploits the internet of things, defined as the extension of connectivity into physical devices and everyday objects.
Shinhan Group Is Betting Long on blockchain
Shinhan Card, headquartered in Seoul, was established as a technical and business company licensed by Shinhan Bank, that manages assets of over $260 billion and stores $192 billion worth of the Korean won. As discussed on BTCManager on December 11, 2018, Shinhan bank already used blockchain technology to standardize rules for governing and managing financial and administrative records, moving over the traditional process where physical cross-checking led to errors despite the strict requirement.
From November 2018, instead, Shinhan announced that it would fully adopt blockchain technology for the settlement of Interest Rate Swap (IRS) transactions after a pilot project was tested successfully.
The move marked the first instance of a local firm to implement the technology within the framework of traditional finance.
