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Absa, Standard Bank join SWIFT's blockchain initiative

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 16 Oct 2017
Blockchain technology supports real-time liquidity monitoring and reconciliation.
Blockchain technology supports real-time liquidity monitoring and reconciliation.

Global financial services co-operative SWIFT and 33 global banks, including Absa and Standard Bank, are making inroads to show how blockchain has the potential to improve real-time Nostro reconciliation.

Nostro account refers to those that a bank holds in a foreign currency in another bank.

SWIFT explains that under the current correspondent banking model, banks need to monitor the funds in their overseas accounts via debit and credit updates and end-of-day statements.

It points out the maintenance and operational work involved represents a significant portion of the cost of making cross-border payments. Distributed ledger technology (DLT), commonly known as blockchain technology, provides real-time visibility to both the account owner and its servicer on the available and forecasted liquidity on the Nostro account, says SWIFT.

SWIFT has just released its interim results on the proof of concept (PoC) for real-time Nostro reconciliation using a SWIFT-developed DLT sandbox detailing the testing process and the initial feedback. The programme was launched at the beginning of the year and final results are expected to be released by December.

Preliminary results of the PoC show the DLT application can deliver the business functionalities and data richness required to support real-time liquidity monitoring and reconciliation.

According to SWIFT, DLT provides real-time visibility to both the account owner and its servicer on the available and forecasted liquidity on the Nostro account, and supports payment reconciliation and investigations by providing an enriched data model based on ISO 20022.

"The DLT PoC supports SWIFT's goal of making cross-border payments more efficient - a mission we have championed through SWIFT gpi [global payments innovation], which offers customers fast, transparent and traceable cross-border payments," says Wim Raymaekers, head of banking market and SWIFT gpi at SWIFT.

SWIFT's DLT sandbox also demonstrated progress in DLT technology and helped identify issues that still need to be addressed to achieve industry-wide adoption.

Specific challenges include the need to develop unique value propositions in response to the different levels of sophistication, automation and past investments of banks. In addition, it is crucial that integration with legacy back-office applications and co-existence with existing processes is taken into account, says SWIFT.

"Preliminary results from the DLT PoC are positive for this use case," adds Damien Vanderveken, head of research and development, SWIFTLab and user experience at SWIFT.

"Significant progress has been made, but it is still early days for the latest generation of blockchain technology, and it will take time before it is mature and scalable enough for mission-critical applications."

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