AND NOW PEOPLE ONE OF THE MOMENTS WE BEEN WAITING FOR…
Swift is Building a Blockchain App to Optimize Global Cash Liquidity
A global platform that connects the vast majority of the world’s banks has begun building a blockchain application to simplify cross-border payments.
If successful, the blockchain application has the potential to finally achieve a longstanding dream of Swift, to free up that cash so it can be invested in more profitable measures.
Speaking with CoinDesk, the company’s head of banking markets, Wim Raymaekers, explained what a successful test of distributed ledger technology (DLT) might mean to his clients.
Currently, Swift’s network of 11,000 financial institutions monitor their accounts around the world using the platform’s existing debit and credit updates via end-of-day statements.
The maintenance of these accounts accounts for a “significant portion of the cost of making cross-border payments,” according to a statement. Exactly how much of that cost could be save with blockchain, Raymaekers said, was unclear.
“That’s what we’re looking for in conclusion of this proof of concept,” he said.
The experiments appear to be part of a larger exploration of various blockchain solutions.
An earlier blockchain POC designed to test the potential benefits and plausibility of moving the ISO 20022 standard to a blockchain, for example, was built using open-source Monax’s codebase.
This most recent blockchain proof-of-concept will leverage the open-source Hyperledger codebase, being developed by a consortium of businesses, of which Swift is a member.
In Swift’s case, though, only authorized members will be able to access the POC, which will be integrated with Swift’s own identity management platform and its public key infrastructure (PKI), a security architecture based on cryptographically verified digital signatures.
“It’s about using technology,” said Raymaekers. “But it’s also very important what do you put into the ledger?”
Not waiting for blockchain
As far back as 2003, Swift had established a working group consisting of several banks that have since taken a leadership role in blockchain to create a decentralized model for bank-to-bank information exchange.
While that early work appears to have been wrapped up in Swift’s Intraday liquidity project to integrate a liquidity dashboard into Swift member databases, the work to improve nostro account management has continued.
In a 2012 report, Raymaekers co-authored he found that the top 80 payments banks in Swift’s membership had already reduced the number of nostro accounts in Europe and the Americas by 16% and 11% respectively, with accounts in Asia Pacific increasing by 4%, between 2005 and 2011.
Now, the current blockchain push is part of an even larger effort within Swift called the Global Payments Innovation initiative, or GPI.
Global Payment Innovation
Stepping back further, the GPI itself is part of a series of sweeping changes by Swift designed to simplify cross-border payments around the world.
According to Raymaekers, that objective has already been largely achieved with traditional technology that the banks can more easily incorporate.
But that’s only half the GPI’s objectives.
The initiative also aims to simplify reconciliation of nostro accounts and more, something Raymaekers believes might prove to be an ideal use case for distributed ledger technology, and something he hopes this most recent proof-of-concept will help prove.