The Interbank Information Network, a blockchain initiative, now has more than 75 of the world’s biggest banks as members as they aim to fend off threats from payment startups.
The Financial Times, citing JPMorgan, reported Société Générale and Santander are among the more than 70 banks that are joining the Interbank Information Network, which JPMorgan, Royal Bank of Canada and ANZ have been testing for 11 months. The idea is to see if blockchain technology can make payments happen faster and with no errors or need for additional compliance. With a mutually accessible ledger, it would enable banks to quickly take care of any issues such as correcting faulty addresses or missing data so that payments are not held up for weeks on end, reported The Financial Times.
As it stands, when the payment instructions are missing information or the information is incorrect, the banks have to engage in additional compliance checks and send questions back through the payment chain until they reache the person with the correct information and can send it back after correcting it. Using blockchain, the banks can create a distributed ledger that can be questioned in real time, which means issues could be resolved almost instantaneously. The network also enables peer-to-peer messaging, noted the report. “One of the complaints that the non-banks have been pointing out [relates to] these frictional processes in the existing cross-border payment mechanism,” said Emma Loftus, head of global payments and receivables at JPMorgan Treasury Services, in the report. “Given that things like blockchain are addressing some of these age-old problems, we’re able to solve the problems ourselves.” She said only a small amount of total payment instructions get stopped, but that it can take as long as two weeks for issues to be resolved.
The paper noted the banks plan to put around 14,500 U.S. dollar payments through the system each day. “Payment is one of the segments banks worry most about in terms of ceding to non-bank competition,” Jason Goldberg, banks analyst at JPMorgan, said in the report. “Blockchain is a way to keep more of that (payments business) in-house.”