Telenor Microfinance Bank Ltd. and Valyou Sdn Bhd, a remittance company and subsidiary of Telenor Group, today announced the launch of a distributed ledger blockchain-based payment platform.

The cross-border platform, based on the Alipay platform developed by Ant Financial Services Group, is intended to make it faster and easier for Pakistanis living in Malaysia to send money home and vice versa.

The blockchain remittance service will be provided by Telenor’s Easypaisa and Valyou, which will target underbanked communities. Both systems use mobile and web-based payment portals and are aimed at increasing economic engagement among the working class and people with less access to central banking systems.

“At around USD 20 billion per year, international remittances are important from the perspective of overall macroeconomic stability and their positive spillover in improving lives of millions of families,” said Tariq Bajwa, governor of the State Bank of Pakistan. “Home remittances contributed to over 6 percent in GDP, equivalent to over 50 percent of our trade deficit.”

By using blockchain technology, Telenor expects to greatly boost the speed and efficiency of cross-border remittances between the two countries. Where traditional systems could take hours to days to complete a payment, a blockchain-based system would be able to resolve it in mere minutes and at less cost.

Blockchain technology uses a shared encrypted ledger that embeds each transaction made across the network in a tamper-proof format. Because transactions are protected by cryptography, it’s possible for multiple parties – banks and payment networks – to maintain the network without revealing the sensitive information stored on it. The shared ledger also allows third parties to audit transaction chains to provide proof against fraud and mistakes.

The system also eliminates financial management and “middlemen” in the process of sending money between the two countries. That would reduce the transactional cost of sending money for users. To make the system more enticing, Alipay will also waive its transaction fees during a one-year trial period.

“The transparency and swiftness this innovative and first-of-its-kind service brings to Pakistani users of international remittance will redefine international money transfer in the country,” said Roar Bjærum, senior vice president of Telenor Financial Services, Telenor Group. “Currently, Pakistan receives about USD 1 billion in home remittances from Malaysia and this Easypaisa-Valyou collaboration is going to change it for the better.”

Blockchain remittance systems are a common use for the technology and have been tested by financial services for years. Recently, Philippine money transfer company Bloom Inc. partnered with blockchain company Remiit Project to extend the platform’s capabilities. Mobile payments companies have also explored the technology, such as peer-to-peer payments company Remitly Inc. and Philippine payment startup Coins.ph.

Large-scale institutions have also peered into blockchain networks including the Society for Worldwide Interbank Financial Telecommunication, responsible for a lot of international money transfers between banks, and global credit card payment network MasterCard Inc.

The introduction of this cross-border payment system comes at a time that Pakistan is in the process of strengthening its own financial system. The government there recently enhanced its National Financial Inclusion Strategy through a five-year plan with the intent to create three million jobs by improving access to financing.

“The new remittance service is one of the examples of how emerging technologies can help countries meet their digital and financial inclusion goals,” said Eric Jing, chairman and chief executive of Ant Financial. Jing added that the blockchain system would be a critical part of Pakistan’s plans for financial inclusion and would help benefit more people in more places.

To maximize the reach of the new service, the State Bank of Pakistan will continue its existing incentives for the promotion of international remittance. And to make it easier for users to approach the system, these incentives will be integrated into a mobile wallet provided by the service accessible by anyone in Pakistan or Malaysia.

“This puts Pakistan on the map of very few countries in the world that have launched international remittance using blockchain technology,” said Bajwa.

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