wordpress blog stats
Connect with us

Hi, what are you looking for?

SWIFT network has picked six banks to run trials on blockchains

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 will join the programme at a later stage to further validate and test the POC.

RBI’s trials with blockchain

Advertisement. Scroll to continue reading.

In January, the Reserve Bank of India’s (RBI)  research wing, the Institute for Development and Research in Banking Technology (IDRBT), concluded a proof of concept study using blockchains for trade finance applications. The proof of concept was run by the National Payments Corporation of India (NPCI), and banks like SBI, HDFC, Citibank and Deutsche Bank.

The study had recommended banks set up and use the technology internally, followed by inter-bank adoption. The blockchain will also help set up a centralised KYC, cross-border payments, loan syndication, trade finance and capital markets applications.

Smart contracts

While blockchains have enormous applications in cutting down financial intermediaries for international money transfers, they will also find huge applications in deploying smart contracts, a set of protocols that facilitate, verify, or enforce the negotiation of a contract. Smart contracts usually have a user interface which can emulate the logic of a contractual clause.

YES Bank, for example, is using a smart contract developed by fintech start up Cateina Technologies on a blockchain which will allow Bajaj Electricals to process disbursement of funds and discounting to its vendors. The bank added that it has put in place a detailed roadmap on commercialising blockchain-based banking solutions in India and is exploring use cases for implementation towards ‘Letter of Credit’ and Documentary Collections, Foreign Remittances and Partnering with Correspondent Banks for Trade Finance among others.

Advertisement. Scroll to continue reading.
Written By

MediaNama’s mission is to help build a digital ecosystem which is open, fair, global and competitive.

Views

News

The DSCI's guidelines are patient-centric and act as a data privacy roadmap for healthcare service providers.

News

In this excerpt from the book, the authors focus on personal data and autocracies. One in particular – Russia.  Autocracies always prioritize information control...

News

By Jai Vipra, Senior Resident Fellow at Vidhi Centre for Legal Policy The use of new technology, including facial recognition technology (FRT) by police...

News

By Stella Joseph, Prakhil Mishra, and Yash Desai The Government of India circulated proposed amendments to the Consumer Protection (E-Commerce) Rules, 2020 (“E-Commerce Rules”) which...

News

By Rahul Rai and Shruti Aji Murali A little less than a year since their release, the Consumer Protection (E-commerce) Rules, 2020 is being amended....

You May Also Like

News

Rajesh Kumar* doesn’t have many enemies in life. But, Uber, for which he drives a cab everyday, is starting to look like one, he...

News

By Aroon Deep and Aditya Chunduru You’re reading it here first: Twitter has complied with government requests to censor 52 tweets that mostly criticised...

Advert

135 job openings in over 60 companies are listed at our free Digital and Mobile Job Board: If you’re looking for a job, or...

News

Google has released a Google Travel Trends Report which states that branded budget hotel search queries grew 179% year over year (YOY) in India, in...

MediaNama is the premier source of information and analysis on Technology Policy in India. More about MediaNama, and contact information, here.

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ

Subscribe to our daily newsletter
Name:*
Your email address:*
*
Please enter all required fields Click to hide
Correct invalid entries Click to hide

© 2008-2021 Mixed Bag Media Pvt. Ltd. Developed By PixelVJ