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SWIFT improves real-time Nostro reconciliation with blockchain

A report published by SWIFT shows that blockchain technology could potentially improve real-time Nostro reconciliation as part of SWIFT’s GPI initiative. The payments organisation has published an interim report on its proof of concept research into whether distributed ledger technology (DLT) can help banks reconcile Nostro accounts more efficiently and in real-time, while lowering costs and operational risk. Work on the DLT proof of concept began in April this year and is due to conclude next month, with the final report due in December 2017.

SWIFT's Wim Raymaekers said: “The DLT proof of concept supports SWIFT’s goal of making cross-border payments more efficient – a mission we have championed through SWIFT GPI, which offers customers fast, transparent and traceable cross-border payments.”

SWIFT explained that, under the current correspondent banking model, banks need to monitor the funds in their overseas accounts via debit and credit updates and end-of-day statements. The maintenance and operational work involved represents a significant portion of the cost of making cross-border payments.

The preliminary results of the research show that the SWIFT-developed DLT application can deliver the business functionalities and data richness required to support real-time liquidity monitoring and reconciliation. SWIFT claims that DLT provides real-time visibility to both the account owner and its servicer on the available and forecasted liquidity on the Nostro account and supports payment reconciliation and investigations by providing an enriched data model based on ISO 20022.

Some of the specific challenges that SWIFT is facing, as it develops its DLT application for Nostro accounts, include the need to develop unique value propositions in response to the different levels of sophistication, automation and past investments of banks. In addition, it is crucial that integration with legacy back office applications and co-existence with existing processes is taken into account.

“Preliminary results from the DLT PoC are positive for this use case. Significant progress has been made, but it is still early days for the latest generation of Blockchain technology, and it will take time before it is mature and scalable enough for mission critical applications,” added SWIFT's Damien Vanderveken.

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