Global financial giants rush to jump on the blockchain bandwagon before younger and more agile fintech startups muscle them out.
Over 75 of the world's biggest financial institutions, including Société Générale and Santander, have decided to join the blockchain-based Interbank Information Network (IIN) launched by JPMorgan, Royal Bank of Canada and ANZ nearly a year ago in a test mode, Financial Times reports.
Faced with stiff competition from new payment processors, global banks are joining IIN, the largest application of distributed ledger technology in the regulated banking industry, to play catch-up with the new trend in technology innovation. The solution is meant to simplify compliance checks, resolve various issues related to incorrect addresses or missing data, and speed up payment execution with a distributed ledger that can be accessed in real-time by all network participants.
While there are no reliable estimations as to the market share won by blockchain-based payment startups, some companies have grown impressively. For example, UK-based TransferWise processes payments to the tune of £3bn every month. The network is forecast to reach a daily volume of 14,500 bank payments.
Emma Loftus, head of global payments at JPMorgan Treasury Services, explains that it may take up to two weeks to resolve issues with erroneous data in payment orders submitted by customers, which creates a lot of friction and inconveniences for the clients. In this respect, the Interbank Information Network has the potential to help to protect banking business.
These delays are caused by a complex system of cross-border payments, where banks can send payments directly only to the banks with “correspondent” relationships, which means that a single payment can be processed by a chain of three or four banks. In case of errors or missing data, banks have to send queries in chain order to all banks involved and wait for the reply which will come along the same path.
A distributed ledger accessed by all network participants will speed up the process significantly, allowing banks to make queries and receive answers in real time.
Blockchain Cross-Border Payments How Blockchain Is Being Used To Solve Cross-Border Payments Problems It's been 9 years since Bitcoin came into existence, making it possible for quick, inexpensive and also transparent peer-to-peer transactions. Over these years, Bitcoin has seen both magnificence and grief. Today, it survives, therefore, does its underlying innovation blockchain which has actually astounded different entities, especially banks as well as banks. With the hope that the distinctive advantages of Bitcoin can be duplicated by drinking the Blockchain Technology right into their ecosystems, many financial institutions have actually been discovering it.
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