Global financial messaging network SWIFT has roped in six global banks to participate in a proof of concept (POC) that will test whether distributed ledger and blockchain technology (DLT) can be used by banks to improve the reconciliation of their Nostro accounts in real time. Nostro account refers to an account that a bank holds in a foreign currency in another bank and is used in cross-border payments. A blockchain, the underlying technology in bitcoins and other cryptocurrencies, is a shared digital ledger which is continuously updated and which can be verified by all parties in a transaction. This cuts down the number of intermediaries in a financial transaction. For example, in India, Axis Bank has partnered with financial technology company Ripple to make cross-border remittances using blockchain. Axis Bank says that Ripple’s technology can reduce the time for international money transfer to 5-10 seconds from the existing 3-5 days. SWIFT has selected ANZ Group, BNP Paribas, BNY Mellon, DBS Bank, RBC Royal Bank and Wells Fargo for being a part of the proof of concept. SWIFT has called these financial institutions correspondent banks and they need to monitor the funds in their overseas accounts with debit and credit updates and end-of-day statements.The proof of concept will test whether blockchains and distributed ledgers may be able to help banks reconcile those Nostro accounts more efficiently and in real time, lowering costs and operational risk. "The maintenance and operational work involved represents a significant portion of the cost of making cross-border payments," SWIFT said. An additional 20 banks…
