SWIFT forges alliance with blockchain consortium R3

January 31, 2019 17:03
Financial institutions around the globe use SWIFT's global messaging system to move trillions of dollars across borders each day. Photo: Reuters

Global banking payments network SWIFT has announced that it will integrate its GPI payments standard with R3's trade finance platform in a move that shows it is embracing the blockchain technology.

The Brussels-based banking giant is launching a proof-of-concept (PoC) to trial with R3's Corda platform, allowing firms to initiate a payment on the [blockchain-powered] trade finance platform, which then goes into GPI, Gottfried Leibbrandt, SWIFT's chief executive, said at a CNBC-moderated panel session at the Paris Fintech Forum.

In the trial, GPI payments will be settled by the firms’ banks, and the resulting credit confirmations will be reported back to the trade platforms via GPI Link on completion. 

The trial will eventually expand to support other distributed ledger technology (DLT), non-DLT and e-commerce trade platforms. 

In recent years, multiple financial technology startups have made waves in the payments industry by introducing new technology solutions, seeking to replace SWIFT’s almost five-decades-old cross-border payments processing network, which can take days for payments to be processed and involves relatively expensive charges for users. 

However, SWIFT has come up with its Global Payments Innovation (GPI), which it touts as the new standard in cross-border payments. 

It said GPI increases payment speed, transparency, and offers real-time end-to-end tracking. 

GPI enables cross-border payments to be made within minutes or even seconds, with over 50 percent of GPI payments credited to end beneficiaries within 30 minutes, SWIFT said. 

As of now, over 300 financial institutions, including more than 50 of the world’s top banks, have adopted GPI, and cross-border payments totaling over US$300 billion are sent every day using the new GPI standard.

Founded in 2014, R3 is an enterprise blockchain software firm that is working with over 200 members and partners across multiple industries around the globe, in order to collaborate on developing its open-source blockchain platform Corda.

“While DLT-enabled trade is taking off, there is still little appetite for settlement in cryptocurrencies, and a pressing need for fast and safe settlement in fiat currencies,” said Luc Meurant, SWIFT’s chief marketing officer. 

“Given the adoption of the Corda platform by trade ecosystems, it was a natural choice to run this proof of concept with R3,” Meurant added. 

While financial service firms are looking for blockchain-based payments systems, SWIFT has been conservative towards the technology. GPI, launched in 2017, mainly relied on existing infrastructure and cloud computing technology.

At the Paris forum, Leibbrandt noted that "banks are hesitant to convert things into a cryptocurrency right now because of the volatility in the currencies"

Leibbrandt announced the partnership with R3 while he was on stage with Brad Garlinghouse, the chief executive of blockchain-powered payments startup Ripple, a close competitor to R3. 

In October 2018, Ripple announced the commercial rollout of its cryptocurrency product for cross-border payments, xRapid. The payment solution uses cryptocurrency XRP to carry out international transactions in “a matter of minutes”, the company said.

Garlinghouse said the weakness of SWIFT network's model is that it is centralized. “Decentralized systems [like blockchain], I think, over time are likely to win,”  CNBC quoted him as saying at the forum.

"SWIFT today is a one-way messaging framework, it isn't a liquidity provider," Garlinghouse said. "When we think about an internet of value, it's a mixture of two-way messaging frameworks, moving to a real-time chatting protocol if you will, coupled with real-time liquidity."

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