Main menu


Blockchain technology could speed up SWIFT data flow

featured image

SWIFT, the global system used by banks to manage cross-border payments, is giving blockchain technology new recognition five years after it was first considered.

The Society for Worldwide Interbank Financial Telecommunications now seeks to speed up the transmission of data on corporate actions, dividend payments, exchange offers, mergers and other events that affect the flow of investors and funds around the world. . With current methods, data passes through various intermediaries before reaching users such as asset managers, brokers and investment custodians, which can lead to inconsistencies and inaccuracies in the data. End users must manually sort, compare, and reconcile data.

Blockchain could do it better. A feature of this technology is that the blockchain is an immutable ledger. The main advantage in this case is that it works via a consensus mechanism that requires agreement on the definition of each data item by the network of participants. Essentially, this means that the blockchain validates data before registering it.

Major financial institutions including Citigroup
Vanguard, Northern Trust
I am participating in a trial.

Tom Zschach, Chief Innovation Officer at SWIFT, said: “We are always looking for ways to validate our technology and deliver on our promises.”

The pilot will use the Assembly platform from enterprise technology company Symbiont. Corporate action data is communicated using the SWIFT network, converted into a single format by SWIFT, and uploaded to Symbiont’s blockchain. Once there, Symbiont’s blockchain compares the information and creates a single record to share. The purpose of using blockchain to create a single record is to reduce manual review of data, saving time and money.

“With this solution, rather than forcing users to make adjustments, what we can do is take all the data, normalize that data using smart contracts, and compare it internally,” said CEO of Symbiont. Mark Smith said: “One of the great values ​​of blockchain technology is having an immutable ledger and a source of information.”

Founded in 1973, SWIFT is a not-for-profit association of 11,000 financial institutions worldwide. This organization provides the infrastructure for interbank communications and facilitates $1.5 trillion worth of payments daily. This network is especially important for facilitating cross-border payments. This network sends messages carrying either credit or debit accounts between banks in different countries. While SWIFT provides critical payment and messaging infrastructure, it has been criticized for being slow and costly because it connects to correspondent banking networks.

SWIFT’s shortcomings have drawn challengers from the cryptocurrency world. Ripple sells a faster and cheaper cross-border payment system through its token XRP. Meta tried to break in with the stablecoin Libra. And central banks around the world are considering their own digital currencies as a potential solution to inefficient cross-border payments. SWIFT itself has previously looked to blockchain as a potential solution to the inefficiencies in the world of interbank communications.

In 2017, SWIFT collaborated with the Hyperledger Fabric blockchain to help banks release cash held in overfunded reserve accounts around the world that are maintained to ensure cross-border payments can be made. It is hoped that blockchain will increase the visibility of these offshore accounts, allowing banks to reduce account balances without risking late payments. It was done.wells fargo
Deutsche Bank, JPMorgan Chase
I was among the participants in the project. The pilot concluded that blockchain could improve liquidity management, but that each member bank would need to upgrade their systems for such an approach to work.

The pilot, announced this week, will be tested with a small group of participants and additional feedback will be provided by the end of the month.

“At the moment, we look at these as R&D projects. The good thing about innovation is that it doesn’t have to work all the time,” Zschach said. “It’s really about our ability to solve real problems out there.