IBM is deploying a blockchain banking solution that will help financial institutions address the processes of universal cross-border payments, designed to reduce the settlement time and lower the cost of completing global payments for businesses and consumers.
Using IBM Blockchain, and in collaboration with technology partners Stellar.org and KlickEx Group, the solution is intended to improve the speed in which banks both clear and settle payment transactions on a single network in near real time.
The network is currently in use by Advanced Pacific Financial Infrastructure for Inclusion (APFII) members, a public-private partnership initially funded by the United Nations and SWIFT.
It is expected to process up to 60 percent of all cross-border payments in the South Pacific's retail foreign exchange corridors including Australia, New Zealand, Fiji, Samoa and Tonga by early next year.
IBM says the solution is already processing live transactions in 12 currency corridors across the Pacific Islands and Australia, New Zealand and the United Kingdom.
Using a blockchain distributed ledger, all appropriate parties have access and insight into the clearing and settlement of financial transactions.
It is designed to augment financial flows worldwide, for all payment types and values, and allows financial institutions to choose the settlement network of their choice for the exchange of central bank-issued digital assets, says IBM.
For example, in the future, the new IBM network could make it possible for a farmer in Samoa to enter into a trade contract with a buyer in Indonesia.
The blockchain would be used to record the terms of the contract, manage trade documentation, allow the farmer to put up collateral, obtain letters of credit, and finalize transaction terms with immediate payment, conducting global trade with transparency and relative ease.
IBM has convened an initial group of diverse banking leaders as part of the development and deployment process. The group includes Banco Bilbao Vizcaya Argentaria, Bank Danamon Indonesia, Bank Mandiri, Bank Negara Indonesia, Bank Permata, Bank Rakyat Indonesia, Kasikornbank Thailand, Mizuho Financial Group, National Australia Bank, Rizal Commercial Banking Corporation (RCBC) Philippines, Sumitomo Mitsui Financial Group, TD Bank, Wizdraw (HK) of WorldCom Finance, and other financial institutions.
“With the guidance of some of the world’s leading financial institutions, IBM is working to explore new ways to make payment networks more efficient and transparent so that banking can happen in real-time, even in the most remote parts of the world,” says Bridget van Kralingen, senior vice president of IBM industry platforms.
“Making distributed ledger technologies more interoperable is the latest example of IBM’s leadership driving the rapid advancement of blockchain,” says van Kralingen, in a statement.
“This is the first time anyone has made blockchain work at an institutionally viable scale,” says Robert Bell, Chairman of APFII and founder of KlickEx Group.
“Through KlickEx, the Pacific has had relatively low-cost, real-time, multi-currency payments for most of the past decade, and this project was a natural next step following our work to create seamless and borderless payments across the Pacific.
"This new innovation and collaboration represents a significant milestone for Stellar as well as the financial technology industry as a whole," says Jed McCaleb, co-founder of Stellar.
"We are using blockchain technology in production to facilitate cross-border payments in multiple integrated currency corridors.
“Currently, cross-border payments tend to take up to several days to clear. This new implementation is poised to start a profound change in the South Pacific nations, and once fully scaled by IBM and its banking partners, it could potentially change the way money is moved around the world, helping to improve existing international transactions and advancing financial inclusion in developing nations."
IBM says the production blockchain network with KlickEx and Stellar is one of many blockchain projects it has underway in financial services.
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