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SWIFT launches initiative to enhance correspondent banking
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- Th Proof of Concept is part of SWIFT’s global payments innovation initiative, which was launched in December 2015 to usher in a new standard in cross-border payments.
SWIFT, the leading provider of secure financial messaging services, has announced the launch of a Proof of Concept (PoC) to explore whether distributed ledger technology (DLT) can be used by banks to improve the reconciliation of their nostro accounts in real time. According to a statement released on Friday, the PoC will help banks to lower costs and operational risk, optimising their global liquidity.
The PoC is part of SWIFT’s global payments innovation (gpi) initiative, which was launched in December 2015 to usher in a new standard in cross-border payments. Banks around the world are working with SWIFT to deliver the gpi initiative and create the next era for correspondent banking.
“Whilst existing DLTs are not currently mature enough for cross-border payments, this technology, bolstered by some additional features from SWIFT, may be interesting for the associated account reconciliation,” says Wim Raymaekers, Head of Banking Market and SWIFT gpi at SWIFT. “This PoC gives us the opportunity to test DLT and determine if it can be applied to this particular use case.”
SWIFT said the gpi initiative is a robust response to evolving bank and corporate needs for enhanced customer service and operational efficiency. Demand for faster and more transparent cross-border transactions is growing; corporates want richer remittance data transfers; the costs of maintaining and ensuring compliance of correspondent banking networks are also increasing; while digital innovators are competing with traditional providers. The gpi initiative is, therefore, designed to enhance correspondent banking by addressing key challenges facing the industry.
Also, 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. The maintenance and operational work involved represents a significant portion of the cost of making cross-border payments. This PoC, set to be launched early in 2017, will test whether distributed ledgers may be able to help banks reconcile those nostro accounts more efficiently and in real time.
“SWIFT will leverage its strong governance, PKI security scheme, BIC legal identifier framework and liquidity standards expertise to deliver a distinctive DLT PoC platform for the benefit of its community,” added Damien Vanderveken, Head of R&D, SWIFTLabs and User Experience at SWIFT.
SWIFT said more than 90 banks have signed up to the gpi initiative. This represents more than 75 percent of SWIFT’s cross-border payments traffic. The financial messaging services provider said its gpi member banks can apply to participate in this PoC.
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