The Society for Worldwide Interbank Financial Telecommunication (SWIFT) announced
that it is looking at the blockchain technology that powers Bitcoin as part of new global money transfer initiative.
SWIFT provides a network that enables financial institutions worldwide to send and receive information about financial transactions in a secure, standardized and reliable environment. The majority of international interbank messages use the SWIFT network, and SWIFT bank identification codes are routinely used by consumers to identify the recipient bank in wire transfers.
According to the SWIFT press release, the global payments innovation initiative
could dramatically improve the customer experience in correspondent banking by increasing the speed, transparency and predictability of cross-border payments. The initiative, designed in collaboration with the payments industry, will enable businesses to receive an enhanced payments service directly from their banks.
Scheduled for launch in early 2016, SWIFT’s global payments innovation initiative will initially focus on a business-to-business payments service supported by participating banks, able to support desired features such as same-day use of funds, transparency and predictability of fees, end-to-end payments tracking, and transfer of rich payment information.
"This global payments innovation initiative is a reflection of the strength of the SWIFT community and its ability to collaborate and innovate, and deliver a new benchmark in cross-border payments," said SWIFT Chairman Yawar Shah.
The global payments innovation initiative will involve the financial technology development community through Innotribe, the innovation arm of Swift. Launched in 2009, Innotribe was created to identify emerging trends in financial services innovation and generate discussions about how these trends could impact the industry going forward. Bringing together innovators, bank representatives, and investors from leading financial institutions, Innotribe has adopted a proactive approach to innovation and fintech.
Earlier this week SWIFT announced
that Innotribe will expand its program to support innovation in emerging fintech ecosystems, and expand its Startup Challenge with a new Industry Challenge initiative. In collaboration with SWIFT member institutions and internal teams, participating fintech solution providers will explore potential opportunities for select business areas and work on proofs of concept that might turn into tangible solutions for the industry.
"Correspondent banking serves the industry with millions of secure cross-border payments day in, day out; with this initiative we are building on those strengths, enabling banks to provide distinctive cross-border payments services and providing real benefits to end customers,” said SWIFT CEO Gottfried Leibbrandt. “This is a critical step in cross-border payments innovation."
"This initiative is an important first step in driving cross-border payments innovation,” said SWIFT Head of Banking Markets Wim Raymaekers. “As part of the initiative we will continue to develop new and enhanced services, utilizing SWIFT's Innotribe initiative to further engage the FinTech community and explore the application of innovations such as real-time payment status tracking, the use of peer-to-peer messaging and blockchain technology."
Raymaekers said that the new global payments initiative was phase one of a process, which could eventually "look at changing correspondent banking settlements and maybe having blockchain technology rather than bilateral correspondent accounts," International Business Times
Raymaekers outlined especially promising applications, for example to cross-border payments, securities, and settlements, as well as SWIFT’s work to develop a strategic blockchain roadmap.
However, Raymaekers added that regulatory compliance, identity management and verification are important issues for distributed blockchain systems, which should have built-in business controls and engagement rules. In fact, banks will not adopt a new open technology framework if those control mechanisms are not there.
"It's a great technology, but you still must know who you are transacting with. So there must be identity, there must be some kind of organization around this," he said. “Technology doesn't necessarily change business behavior. Technical measures alone are not enough. We need those business rules."
SWIFT, which has been exploring blockchain technology for some time, joins other top financial institutions in realizing that the potential benefits of blockchain technology in the financial industry – faster and cheaper transactions, permanently recorded in tamper-proof shared ledgers – are too big to ignore. At the same time, the concerns expressed by Raymaekers indicate that SWIFT could opt for a private, “permissioned” blockchain.