“Blockchain is set to transform the loan market” says Dr. Alex Yang, CEO of V SYSTEMS
Loan market involves many excessive layers
For many, among the various financial segments that is set to be impact by blockchain, one area stands out in particular — the loan market. It hits close to home for a very large population in the world, especially because of its close relationship with the residential market.
According to The Washington Post, 66% of all Americans have a mortgage on their house. Daily Express and Nikkei Asian Review even reported numbers as high as 70% in the UK and China. The entire residential mortgage market could be worth a staggering $31 trillion by the end of 2018.
It’s not hard to know how the number comes about. Think about all the middlemen and excessive resources involved — credit agencies, solicitors, thousands of paperwork and many more. Each layer adds not only time, but also costs to the mortgage process. As reported by Money, in the property loan market, each intermediary the mortgage transaction goes through could be adding 1% — 2% of the property value to the overall cost.
With the introduction of blockchain, however, all of these intermediaries and layers could be reduced, if not eliminated.
Blockchain has massive potential in the loan market
Banks are still relying heavily on inefficient processes like faxes between different parties when structuring syndicated loans. It shows a strong need for a tamper-proof, secure, and transparent ledger (i.e. blockchain) to mitigate this situation and cut down the time and costs involved.
V SYSTEMS’ CEO, Dr Alex Yang, recently spoke at Asia Pacific Loan Market Association’s Loan Market Conference on how blockchain could be utilized in the industry. When addressing the application of blockchain for syndicated loans to a group of leaders from industry giants like KPMG, ANZ, ICBC etc., Alex said “Blockchain as a distributed ledger sets a solid database for the mortgage process. By having a reliable and universally available database, information sharing is made much easier. Processes like reconciliation, risk management, settlement etc. could therefore be simplified and accelerated by a great deal.”
In fact, progress have already been made to put blockchain to the test in the loan market. According to a blockchain pilot rolled out by the Spanish banking group BBVA, the process of completing syndicated loans were reduced from two weeks to a day or two with the use blockchain. The time for loan signing and documentation processing was even brought down from several hours to a few minutes.
And this is just a blockchain pilot. With more investments pouring into R&D, the benefits that blockchain brings to the loan market could be hugely amplified. Alex even predicted that, apart from the database functionality, smart contracts and the tokenisation of deposits could also be playing key roles in realising the advantages of blockchain in the loan market.
V SYSTEMS will bring a scalable blockchain layer to the loan market
The major purpose of blockchain in the loan market is to serve as a ledger, recording (and more importantly, safeguarding) all necessary information, so that the process of information sharing can be digitized and take place with just a flick of the finger.
This is easier said than done, however. The blockchain must be scalable and stable enough to carry to vast amount of information, all while being readily available when called upon. And this is where V SYSTEMS steps in — with the SPoS mechanism that is a stable and energy-efficient (thus very scalable) solution, V SYSTEMS blockchains outperform existing consensus mechanisms like PoW and traditional PoS.
The team is bringing the world’s first full-featured blockchain database for storing object-oriented data. Data and information are represented in a descriptive and interactive manner. And the objective data type supports high concurrency and efficient indexing functions.
By building DApps used in the loan market on top of the V SYSTEMS network, the full potential of a decentralised network could be unleashed. And just as the adoption arises around the globe (Bank of Communications in China, Raiffeisen Bank in Russia, Bank of China in Hong Kong), the impact of blockchain to the loan market is just on the horizon.