SWIFT’s Blockchain Pilot For Bank-To-Bank Transfers Went ‘Extremely Well’

A report by the financial messaging provider SWIFT and 34 global transaction banks that sought to answer the question of how distributed ledger technology (DLT) (Blockchain) Proof of Concept (PoC) can help Nostro account reconciliation has been published today, March 8, with positive results.

A Nostro account is a bank’s account in a foreign currency in another bank. Back in April 2017, SWIFT had first announced that it was going to use the Hyperledger platform as a basis for updating its practices of cross-border market payments in collaboration with Australia and New Zealand Banking Group, BNP Paribas, BNY Mellon and others.

SWIFT’s test project added an additional 22 more banks in July 2017, including Commerzbank, Societe Generale and JPMorgan Chase Bank.

SWIFT’s press release about the now published report on the bank-to-bank project notes that the PoC intended to figure out how a combination of DLT and SWIFT assets could meet “industry-level governance, security and data privacy requirements,” as well as show benefits for its use over other applications.

The 34 participating banks each had their own node deployed in a SWIFT DLT sandbox, whose underlying technology was the Hyperledger Fabric v1.0.

PoC results showed that DLT could provide the functions needed for Nostro account reconciliation, including “real-time event handling, transaction status updates, full audit trails, visibility of expected and available balances, real-time simplified account entries confirmation, the identification of pending entries and potential related issues, and […] the data required to support regulatory reporting.”

Damien Vanderveken, SWIFT’s Head of Research and Development, said in the press release:

“The PoC went extremely well, proving the fantastic progress that has been made with DLT and the Hyperledger fabric in particular.”

The press release also noted that DLT has made progress with data confidentiality and security, governance, and ID frameworks, proving that this new technology can support “financial multi-bank applications.”

Stephen Gilderdale, SWIFT’s Chief Platform Officer, stated that it is a “strategic priority” for SWIFT to look into DLT:

“We are already working on new PoCs and will continue our R&D efforts to ensure that SWIFT customers will be able to leverage their existing SWIFT infrastructure and connectivity to benefit from blockchain services, whether offered by SWIFT or by third parties, on a secure and trusted platform.”

However, the press release did note that prerequisites, like account servers migrating to real-time liquidity reporting and processing, would have to be met before the financial industry could adopt DLT on a large scale.

DLT technology will also need more development to be ready to support a large global infrastructure. The press release gives the example that 10,000 channels would be required to cover all current Nostro relationships, while the study only used 528.

As for the next steps going forward, the SWIFT report states that it will encourage its community to begin using real-time liquidity reporting and processing, as well as developing their platform to “complement it with DLT capabilities.”