SWIFT Enters the Blockchain Arena
- By Andrew Deichler
- Published: 1/13/2017
SWIFT is exploring whether blockchain technology can improve global banks’ reconciliation processes. The proof of concept (POC) is part of its Global Payments Innovation (GPI) initiative, which aims to streamline cross-border payments.
Currently, banks need to monitor funds in their overseas accounts through debit and credit updates and end-of-day settlements—which add substantial cost to cross-border payments. SWIFT is testing whether distributed ledger technology (DLT) could help banks reconcile “nostro” accounts in real-time, and at a lower cost and risk.
SWIFT said it would combine open-source Hyperledger technology with its own assets to bring it in-line with the financial industry. It will use a private blockchain in a closed user group environment with specific user requirements and strong data controls. GPI member banks can apply to participate in the POC, which will launch in early 2017.
“Whilst existing DLTs are not currently mature enough for cross-border payments, this technology, bolstered by some additional features from SWIFT, may be interesting for the associated account reconciliation,” says Wim Raymaekers, head of banking market and SWIFT GPI. “This POC gives us the opportunity to test DLT and determine if it can be applied to this particular use case.”
Magnus Carlsson, AFP’s manager of treasury and payments, sees this as a “smart move” for SWIFT. “Addressing the areas that are the most cumbersome and costly may be the best way to use new technologies such as distributed ledgers/blockchain, etc.,” he said.
Carlsson added that this approach could draw interest from corporate treasury and finance professionals, who have had some trouble building business cases for implementing blockchain technology. “What is really positive for the end-user, often the corporate practitioner, is the potential for higher efficiency and lower cost without having to make any changes themselves,” he said.
Furthermore, as Carlsson noted during a panel session on the GPI at Sibos last year, one major cross-border payment challenge for corporates is the time delay. Oftentimes, payments can be delayed, which can cause major headaches for treasury departments. Thus if using blockchain does indeed result in real-time cross-border payments reconciliation, corporates will have yet another business case for the technology.
SWIFT has signed up for than 90 banks for its GPI initiative, since launching the service in December 2015. It is slated to go live this year.
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