Swift developed and tested distributed ledger technology (DLT) sandbox with 33 global transactions banks, as part of its SWIFT gpi service. The PoC is testing whether blockchain technology can help banks reconcile Nostro accounts more efficiently and in real-time.
Why is it important?
Correspondent banking as it is today, requires banks to monitor the funds their overseas accounts via debit and credit updated and end-of-day statements. Besides being a slow process, it is also expensive to maintain and manage operations. This makes cross-border payments expensive.
Blockchain or distributed ledger technology (DLT) can allow banks to monitor cross-border transactions in real time, solving the liquidity problem. Every member of the blockchain has real-time visibility of the funds, as well as, of both the account owner and its servicer on the available and forecasted liquidity on the Nostro account. This can make cross-border transactions more efficiently and less costly.
What progress has been made?
So far, SWIFTs DLT sandbox 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.
SWIFTs DLT PoC started in April 2017 and will conclude in November 2017, with the final results available in December. If successful, blockchain technology can become very important for the banking industry.
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