JPMorgan Chase is planning to expand its use of blockchain technology to improve the banking industry’s payment system, as well as get FinTechs to experiment on developing the platform.
The platform allows banks to quickly resolve compliance issues that can delay payments by weeks. Last year, more than 75 of the world’s biggest banks became members of the Interbank Information Network (IIN) to fight off threats from payment startups. And more than 220 banks have signed up for the original service, which enables data sharing on payments over the network.
“The initial use case was around sanctions screening,” JPMorgan’s head of global clearing, John Hunter, said, according to The Financial Times. “Now we’re looking at the ability to do more at the point of settlement.”
Hunter added that JPMorgan has also created a function that can verify in real time that a payment was being transferred into a valid account.
“Banks straight through processing rates are in the mid-80s to the mid-90s. It’s that gap — the 5 to 20 per cent of payments — that have to be assessed by operations where we’re trying to alleviate some of that pain,” he said.
The firm anticipates that the system will be live by the third quarter of this year, with the expectation that it will be especially useful for international payments, which experience higher error rates. The services are currently free, but there is the possibility for both paid and commercial applications in the future.
In addition, the IIN is setting up a sandbox so that FinTechs can use the network to “develop and put out applications.” That is also expected to launch in the third quarter, offering developers secure messaging, document file transfer, data modelling, and more.
“This removes many challenges and hurdles — tooling, ecosystem, data, environment, etc,” said Hunter. “Developers only need to bring their intellect.”