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Local banks join SWIFT blockchain proof of concept

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 07 Jul 2017
Wim Raymaekers, head of banking markets at SWIFT.
Wim Raymaekers, head of banking markets at SWIFT.

Four local banks have joined the Society for Worldwide Interbank Financial Telecommunication's (SWIFT's) blockchain proof of concept (POC) initiative.

According to SWIFT, Absa, FirstRand Bank, Standard Bank and Nedbank are among the 22 additional global banks to recently join its blockchain POC initiative, designed to validate whether blockchain can help banks reconcile their international nostro accounts in real-time, optimising their global liquidity.

The POC was introduced earlier this year in collaboration with leading correspondent banks. It 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, notes the global bank transfer system.

The initiative builds on the rulebook defined by SWIFT as part of the recently published intraday liquidity standard.

Other banks that recently joined the POC include: ABN AMRO Bank, BBVA, Banco Santander, China Construction Bank, China Minsheng Banking, Commerzbank, Deutsche Bank, Erste Group Bank, Intesa Sanpaolo and JPMorgan Chase Bank.

These banks, notes SWIFT, will test and validate the POC's blockchain application, and act as a validation group to further test the application and evaluate how the technology scales and performs.

"Collaboration is the cornerstone of innovation," says Wim Raymaekers, head of banking markets and SWIFT gpi at SWIFT. "This new group of banks allows us to greatly extend the scope of multi-lateral testing of the blockchain application and thus adds considerable weight to the findings. We warmly welcome the new banks and look forward to their insights."

SWIFT says through the POC, it is leveraging the recently released Hyperledger Fabric v1.0 technology, and combining it with key SWIFT assets, to ensure all the information related to nostro/vostro accounts is kept private and seen only by the account owner and its correspondent banking partner.

"The potential business benefits ensuing from the POC are clear," says Damien Vanderveken, head of R&D, SWIFTLab and UX at SWIFT. "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."

Moving forward, the POC blockchain application will undergo testing, with the results scheduled to be published in September and presented at Sibos in Toronto in October.

"This POC 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," says Sean Mouton, chief technology manager at Absa.

Since it became available in January, 20 global transaction banks have begun actively using or implementing the SWIFT gpi service, with another 50 in the implementation pipeline.

"Being part of SWIFT 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," says Kent Marais, head of TPS product management at Standard Bank SA.

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