By Our Reporter
SWIFT has announced that 22 additional global banks have joined its block chain Proof of Concept (PoC), designed to validate whether the technology can help banks reconcile their international nostro accounts in real time. The PoC is part of the SWIFT gpi (global payments innovation) service, the new standard for cross-border payments.
“Collaboration is the cornerstone of innovation. This new group of banks allows us to greatly extend the scope of multi-lateral testing of the block chain application and thus add considerable weight to the findings. We warmly welcome the new banks and look forward to their insights,” said Wim Raymaekers, Head of Banking Markets and SWIFT gpi at SWIFT.
With its global reach, SWIFT gpi is regarded by banks as the natural place to collaborate and innovate cross-border payments.
The banks that have recently joined the PoC include: ABN AMRO Bank, ABSA Bank, BBVA, Banco Santander, China Construction Bank, China Minsheng Banking, Commerzbank, Deutsche Bank, Erste Group Bank, FirstRand Bank, IntesaSanpaolo, JPMorgan Chase Bank, Lloyds Bank, Mashreq bank, Nedbank, Rabobank, SociétéGénérale, Standard Bank of South Africa, Standard Chartered Bank, Sumitomo Mitsui Banking Corporation, UniCredit and Westpac Banking Corporation.
These banks will test and validate the PoC’s blockchain application, currently under development by SWIFT and a group of six founding banks that launched the PoC earlier in the year. Working independently of the founding banks, the 22 institutions will act as a validation group to further test the application and evaluate how the technology scales and performs.
Launched in January 2017, the PoC aims to help banks overcome significant challenges in monitoring and managing their international nostro accounts, which are crucial to the facilitation of cross-border payments.
Currently, banks cannot monitor their account positions in real time due to lack of intraday reporting coverage. As such, the PoC recognizes the need for banks to receive real-time liquidity data in order to manage funds throughout the business day. At its core, the PoC builds on the rulebook defined by SWIFT as part of the recently published intraday liquidity standard.
“The potential business benefits ensuing from the PoC are clear. If banks could manage their nostro account liquidity in real time, it would allow them to accurately gauge how much money is required in each account at any given point, ultimately enabling them to free up significant funds for other investments,” said Damien Vanderveken, Head of R&D, SWIFTLab and UX at SWIFT.
Sean Mouton, the Chief Technology Manager, ABSA said, “This proof of concept has value to us as banks, that if we get it right, we can identify unwanted and fraudulent transactions inter day and not only when we do our nostro reconciliations.”
In developing the PoC, SWIFT is leveraging the recently released Hyperledger[i] Fabric v1.0 technology, and combining it with key SWIFT assets, to ensure that all the information related to nostro/vostro accounts is kept private and seen only by the account owner and its correspondent banking partner.
The PoC application will use a private permissioned blockchain in a closed user group environment, with specific user profiles and strong data controls. User privileges and data access will also be strictly governed.
“In the last few years there has been extensive industry talk about Fintech disruption and innovation in the world of correspondent banking, where banks have had to subsequently react. SWIFT gpi is a collective response to some of these threats. Being part of SWIFT global payments innovation (gpi), and working with our industry counterparts, is giving correspondent banks a platform to examine and refine current processes, and to collaborate and explore different, more efficient ways of doing things. Ultimately, our clients will benefit most from this initiative. SWIFT gpi is one of the more exciting initiatives in correspondent banking in recent years,” said Kent Marais, Head TPS Product Management, Standard Bank South Africa.
Moving forward, the PoC blockchain application will undergo testing over the summer months, with the results scheduled to be published in September and presented at Sibos in Toronto in October.
“FirstRand Bank is excited to be involved in assisting SWIFT in uncovering DLT’s potential in the Nostro Management space. We welcome any developments associated with achieving real time Nostro and Liquidity Management and the increased operational efficiencies and improved risk management that accompany them,” said Bernard Carless, Head Settlement & SWIFT, FirstRand Bank.
The PoC is being undertaken as part of SWIFT gpi, a new service that is revolutionizing the cross-border payments industry by combining real-time payments tracking with the speed and certainty of same-day settlement for international payments.
Since it became available in January 2017, 20 global transaction banks have begun actively using or implementing the SWIFT gpi service, with another 50 in the implementation pipeline.
Nyambura is a senior journalist based in Kampala