Blockchain technology has often been well-praised for its ability to facilitate instant cross-border transactions. However, at this moment in time, while most banks are researching the benefits of blockchain, no system of this kind has been implemented yet.
A recent announcement made by SWIFT, the world’s biggest global interbank messaging platform, may make blockchain-based bank-supported cross-border payments a reality. As such, the SWIFT announcement mentions that blockchain firms will soon be able to leverage the Global Payments Innovation (GPI) platform to carry out instant payments.
To put things better into perspective, SWIFT has been trialling out this system for a while. Successful testing was carried out via the R3 CORDA platform, thus allowing for GPI payments based on blockchain technology to be confirmed. This means that banks and other financial institutions will be able to process blockchain-based payments, while also integrating them within workflows. This will be possible without needing to update to an entirely-new system, granted that blockchain integration and standardization across the industry is bound to be an expensive and time-consuming endeavour.
It is important to point out that SWIFT currently handles payments worth over $40 billion via its GPI platform. Out of these transactions, over 50% take a few minutes, whereas the remaining 50% are confirmed within 24 hours. The newly-announced distributed ledger technology integration will ensure that all of SWIFT’s GPI-based cross-border payments will be sent out and received within a matter of minutes.
As part of the project announcement, SWIFT stated: “Pending the success of a proof of concept with the R3 trade platform, we’ll also soon be enabling GPI payments on DLT-based trade platforms. Resolving the payment challenges DLT platforms face, we will enable GPI payments to be initiated within trade workflows, automatically passing them on to the banking system.”
The blockchain integration will also introduce several other features that are generally associated with the technology. These include, but are not limited to: immutability, solid record keeping, and increased security. As such, by leveraging the system, bank-processed payments will be more secure, while fraud attempts will be made obsolete. Additionally, the project allows for further integration of blockchain technology into our daily lives.
The relevancy of the project rests in the prominence of banks. Generally, the purpose of blockchain technology and cryptocurrencies is to reduce the importance and impact of banks on the financial market. However, banks and other financial institutions are still needed for loans, investments, and various types of business-to-business, business-to-customer, and customer-to-business transactions. SWIFT’s new system ensures that banks remain updated with the latest technologies, and that they continue to increase their service efficiency.
It will likely take several more years before we enter a society that is fully-based on blockchain technology, decentralization and transparency. Until then, inter-bank payments systems are still required, and their advancements are well-met.