Poland might be the first country in Europe, where banks will make use of the blockchain solution technology on a mass scale, and the first country to offer the blockchain solution to their clients.
This is the English version of a blog post written originally by Maciej Samcik, one of Polish leading consumer economy bloggers, published here by his permission. Read the original post (and other great articles by Maciej) on his blog: https://subiektywnieofinansach.pl/trwaly-nosnik-blockchain-worm-taryfa-oplat-i-prowizji/. Enjoy!
It is undeniable that banks you transact with will shortly inform you about changes in document sharing, interest rates, or commission charges. Blockchain technology - the same one that undergirds cryptocurrencies - may soon come to light and land on our doorstep. What exactly will change? "Durable media."
There is a high probability that Polish banks, as precursors in the financial services sector globally, might use the blockchain technology as a means of communication with their customers. Blockchain will ensure the authenticity of documents sent out to us. Even if your bank will not commence using blockchain to dispatch a new set of regulations, or any other information relating to changes in interest rates or commission charges, one can rest assured that the radical change is looming – and it has already arrived for some of us.
One of the most technologically advanced Polish banking institutions, mBank, has just sent its clients the following letter:
"In accordance with the requirements set by the Supervisory bodies, we will be storing regulatory documents, the schedules of fees and commissions, and the schedules of interest rates in a new manner. (...) From now on, we will be providing you with a unique identifier for each document, which gives you a guarantee of authenticity and inviolability. The identifier will be supplied to you along with the information on changes in these documents. (...) The enclosed schedule of fees and commissions is the first document, which we have started storing in a new fashion".
The reason why banks decided to introduce us to new ways of e-document verification is a dispute about the so-called "durable media." In other words, the dispute is about the way a banking institution can inform us about changes in its products, increased commissions or any other events, without violating our rights.
Durable media, by the rule of law, is a new mean of informing clients about material changes that may affect them (i.e. new pricing, terms and conditions and so on). This unique method ensures that records cannot be removed or altered from the original, once published version (so it will have to remain out of banks' reach). Each document, throughout its time-span, needs to be accessible to clients at all times. Also, banks have to be certain that each customer received and read the particular piece of information.
Up until today, banks have been publishing revisions to regulations either on their websites or via email, to avoid printing and postage costs of mass mailing. In rare cases, banks also send out CD-ROM discs with policy revisions. Each of those solutions raises however questions of costs, technical accessibility and data tampering or leaks.
It goes without saying that publishing documents online is the cheapest option, however, it provides no guarantee that the subject document will not change its form after being published and that it has been read by everyone. Publishing documents online through electronic banking channels makes the document available to clients, however still does not solve the first problem.
Sending an email means that the bank dispatches the document, and it remains out of its hands. However e-mail servers are often located abroad (as a consequence this can pose doubts if this solution is GDPR-compliant), and some providers include confusing terms in their regulations, like "we cannot guarantee the delivery".
CD-ROM resolves the issues above. First of all, however, its production and mailing costs are the same or even more expensive from the cost of sending the document by registered post. Secondly, who owns a CD drive in 2018? Clients found it quite puzzling when one of big banks distributed a new set of regulations about personal bank accounts using millions of CD-ROM disc. It is doubtful whether the bank guaranteed its clients access to documents at any point in time.
Banks in Poland, therefore, have started contemplating how to remain regulatory compliant and avoid sending annoying letters to clients (as this exercise may cost millions). At the same time they wish to avoid huge financial penalties for misinformation, imposed by the Polish Office of Competition and Consumer Protection.
At the end of February, banks finished off testing three solutions to the durable media problem, one based on the "electronic seal” and the other two based on the blockchain technology (IBM and Billon solutions). The Polish Banks' Association is now analysing the results of the test and is awaiting an opinion issued by the Office of Competition and Consumer Protection and by the Polish Financial Supervision Authority. Any further recommendations from these institutions will determine the ultimate solution which will be chosen and implemented.
The Banks' Association would prefer for all the banks to use the same, common solution, however, bankers are still undecided whether to go down the blockchain, innovation route, or to continue using old, but proven, legacy solutions.
What are the differences between the three solutions tested by the banks?
Andrzej Horoszczak, CEO and founder of Billon, has no doubts that, at least, some banks, will "buy into" the state-of-the-art solution, which writes entire documents into blockchain. Eight banks have tested the blockchain solution to date, and it has proven very efficient - it enables to write 5mln new documents a day into the blockchain structure.
So, how in practice, will document sharing work thanks to Billon's technology? Bank clients will receive a text message, a push notification, or an email highlighting that the bank has changed some document, e.g. the schedule of fees and commissions, which can be accessed via a 20-digit code found in the notification. This code is nothing else but a blockchain address linked to a particular client – document’s cryptographic hash sum. Clients can read the document by accessing/logging in to the bank’s or Billon’s application or alternatively, through online banking.
It is also believed that BIK will also offer such end user application. If the client wants to access the application without logging into their online banking or the BIK’s website - they would have to define a password that will decrypt PDF files along with the documentation sent off by banks. Alternatively, they may log into the service by using a standard, countrywide system ePUAP, the same that is used to contact public administration government offices.
Let's go back to mBank, which informed its clients about a possibility to check online whether the document we received is the correct one. The e-mail note form the bank looked like that:
"Your unique document identifier to access the schedule of fees and commissions, other conditions remaining unchanged; (a hash code.....a combination of letters and numbers ...ce33e0bbe(...)b32".
The bank requested to use this identity code, and log into user account to check the document. On there, in the "Information" section, there was the requested schedule of fees and commissions, and also a notification how to interpret this information:
"All important documents are sent off to our clients via links and are also accessed online. Clients can either save the documents down once accessed via the link or on the home PCs or can download the document from the website. If you wish to ensure that the document from the link is exactly the same as the one that had once been sent to you, you will be able to use a unique identifier (Hash SHA-256)."
In order to check whether the document that the bank's link directs us to is original, you need to follow the steps below:
Next step would be to compare the two identifiers (one sent by mBank, and the one presented to us on the website). If the identifiers are identical, it would imply that the document is indeed original, and it has never been tinkered with.
The solution which mBank started utilising to communicate with its clients is called WORM and is one of the three recommended solutions which banks can choose from. Banks' documents are stored in a piece of hardware, and each one is password encrypted. Any forced interference in the document will portend an encryption breach. It is however surprising that mBank, which has been considered one of the most innovative financial institutions in Poland, opted for the most conservative solution in the "durable media" sphere.
One is certain for sure - irrespective of which solution will be chosen by banks, the era of sending documentation through standard, registered post is coming to a definite end. Bankers will publish documents to their clients, either via servers in the cloud or on their websites with an option to check that the document has not been altered. They can publish them using the distributed ledger blockchain technology, or a form of the calculation cloud, without the need for drives or massive hardware.
If bankers will go for the blockchain based solution, we can definitely say that the revolution has started. It may herald a capitalisation of the blockchain technology on a much bigger scale.
If banks choose Billon’s blockchain, including its e-money application, they might also tap into the niche of a younger clientele, whose needs are not addressed by current banking products.