Swift starts testing viability of blockchain for international interbank financial transactions

Society for Worldwide Interbank Financial Telecommunication (Swift) has announced that it is developing a proof of concept (PoC) application in collaboration with banks around the world. The PoC is evaluating the effectiveness of Distributed Ledger Technology, or blockchain, in improving the real time reconciliation of accounts by banks held in foreign currency, known as nostro accounts. The exercise is an effort to optimise the global financial liquidity.Australia and New Zealand Banking Group, BNP Paribas, BNY Mellon, DBS Bank, RBC Royal Bank and Wells Fargo are some of the banks participating in the pilot phase of the introduction of blockchain technologies for nostro accounts. An additional 20 banks are expected to join the tests. During the course of the test, challenges will be identified, specifications will be decided, and the application will be improved based on feedback. The PoC is meant to make cross border financial transactions more efficient.Wim Raymaekers, Head of Banking Markets and Swift gpi at Swift says "The nostro DLT proof of concept is deeply embedded in the SWIFT gpi story of streamlining the cross-border payments system. It allows us to explore how this maturing technology can provide a collaborative solution to what our gpi member banks have identified as a significant pain point – nostro accounts reconciliation."Damien Vanderveken, Head of R&D, SwiftLab and UX at Swift, says "We are very excited to start the DLT proof of concept with these participating banks. This is a great step forward and another example of how SWIFT and the industry can work together to solve concrete business challenges with an innovative and collaborative mindset"Swift is using the Hyperledger Fabric V1 technology for the PoC. The technology is open source, and is developed by the Linux Foundation, along with financial institutions around the world. The Hyperledger Fabric V1 source code is available on GitHub. The information shared in the blockchain will be accessible only to the owner and the partnering bank, even though copies are stored with all the participating banks. The PoC application has strong data controls, and uses a private permissioned blockchain in a closed environment.The Swift network was used in a $81 million heist from Bangladesh that stunned financial institutions around the world, with focused efforts being taken to protect Swift and similar cross banking networks from cyber attacks. In India, the Union Bank managed to recover an even bigger amount, $171 million, that came to light when the treasury department of the bank was reconciling payments from the Swift network at the end of the day. The money had been debited from a nostro account. The blockchain PoC will allow for realtime reconciliation of such payments.