SWIFT co-operative to use blockchain technology for cross border payments

SWIFT co-operative is exploring blockchain technology in an attempt to deliver a new standard in cross-border payments.

The Belgian co-op is the world’s leading provider of secure financial messaging services, used by over 11,000 financial institutions.

The Proof of Concept is part of SWIFT’s global payments innovation (gpi) initiative, which aims to determine if distributed ledger technology such as blockchain technology (DLT) could help banks reconcile their nostro accounts databases in real time. Nostro accounts are those that a bank holds in a foreign currency in another bank.

In February thieves hacked into SWIFT’s software of the Bangladesh Central Bank and stole USD $81m (£55.9m) by sending messages to the Federal Reserve Bank of New York. Since then, the co-operative has been implementing a series of measures designed to increase cyber security.

SWIFT gpi member banks can apply to participate in the Proof of Concept, set to launch this year. Over 90 banks have signed up, representing more than 75% of the organisation’s cross-border payment traffic.

The co-op plans to combine the new technology with existing systems. It will use open-source Huperledger blockchain technology, and associate it with Swift tools and features to make sure it corresponds with the financial industry’s requirements.

“While existing DLTs are not currently mature enough for cross-border payments, this technology, bolstered by some additional features from SWIFT, may be interesting for the associated account reconciliation,” said Wim Raymaekers, head of banking market and SWIFT gpi at SWIFT. “This PoC gives us the opportunity to test DLT and determine if it can be applied to this particular use case.”

Damien Vanderveken, head of Research and Development at SWIFTLabs and User Experience at SWIFT, said: “SWIFT will leverage its strong governance, PKI (public key infrastructure) security scheme, BIC (bank identifier code) legal identifier framework and liquidity standards expertise to deliver a distinctive DLT PoC platform for the benefit of its community.”