IBM unveils blockchain-powered payments network

AN ARTICLE FROM THE AUSTRALIAN BUSINESS REVIEW  - October 16, 2017 7:25PM by SUPRATIM ADHIKARI

IBM has unveiled a new payments solution to help financial institutions cut settlement time and costs associated with cross-border payments, in the latest move by the tech giant to leverage its blockchain capabilities.

The company has teamed up with regional financial services company KlickEx Group and Stellar.org to run the solution from the IBM Blockchain Platform on Hyperledger Fabric.

Stellar is an open-source blockchain network that is purpose-built for the issuance and exchange of digital assets. Digital assets are issued on the Stellar network as a foreign exchange bridge to allow for near real time settlement. KlickEx Group serves as the founding financial institution for the region, servicing banks, retail clients and consumers using this new network.

With the processing of international payments a costly, laborious and error-prone job, IBM is exploring pathways to put the distributed ledger to test.

“Making distributed ledger technologies more interoperable is the latest example ofIBM’s leadership driving the rapid advancement of blockchain,” Bridget van Kralingen, senior vice president of IBM Industry Platforms, said.

The IBM solution is already processing live transactions in 12 currency corridors across the Pacific Islands and Australia, New Zealand and the United Kingdom. The network is currently in use by Advanced Pacific Financial Infrastructure for Inclusion (APFII) members, a public-private partnership initially funded by the United Nations and SWIFT.

It is expected to process up to 60 per cent of all cross-border payments in the South Pacific’s retail foreign exchange corridors including Australia, New Zealand, Fiji, Samoa and Tonga by early next year.

The blockchain technology gives all appropriate parties insight into the clearing and settlement of financial transactions, creating a trusted platform for transactions. The ledger can be used to record the terms of the contract, manage trade documentation, obtain letters of credit, and finalise transaction terms with immediate payment.

According to IBM, the solution is designed to augment financial flows worldwide, for all payment types and values, and allows financial institutions to choose the settlement network of their choice for the exchange of central bank-issued digital assets.

IBM has convened an initial group of APAC banking institutions, including National Australia Bank, as part of the development and deployment process,

“With the guidance of some of the world’s leading financial institutions, IBM is working to explore new ways to make payment networks more efficient and transparent so that banking can happen in real-time, even in the most remote parts of the world.”

This is the first time anyone has made blockchain work at an institutionally viable scale,” said Robert Bell, chairman of APFII and founder of KlickEx.

“Through KlickEx, the Pacific has had relatively low-cost, real-time, multi-currency payments for most of the past decade and this project was a natural next step following our work to create seamless and borderless payments across the Pacific.”