SWIFT Likes Distributed Ledgers, Sort Of

SWIFT has found gaps in the promise and the delivery of distributed ledger technologies when it comes to payments. But it still thinks it has potential.  

Their POV was laid out in a paper jointly authored with Accenture, titled “Delivering an Industry Standard Platform through Community Collaboration.” In it, SWIFT found that there are eight critical factors that need to be satisfied before DLT can gain currency (no pun intended) in the financial industry at large. 

For SWIFT, the initiative has been ongoing to build out both the technology and operations to bring such nascent financial services options to the industry. There’s some benefits to a DLT system, according to the paper, wherein FIs “trust in a disseminated system” and there is simplicity in reconciliation of information. There’s also the immutability of the transactions themselves, where they can be traced all along their path in an indelible record.

Among the most pressing needs: Strong governance, where roles among affected parties are clearly defined; data controls, wherein data is maintained in such a way as to preserve confidentiality.  

There is of course the ongoing need to be in compliance with regulatory compliance, which can be fluid.  Standardization is a must-have in order to enable straight through processing. A robust identity framework ensures that transactions are handled correctly.

It should come as no surprise that security remains a key facet of any new technology platform, which ties into reliability and scalability of the DLT services themselves.  Scale is especially critical in an environment where hundreds and even thousands of transactions need to be processed every second of a trading day. 

SWIFT maintains in the paper that more research is needed in order to make determinations over whether DLT systems would be fully interoperable with existing, legacy infrastructure; and whether DLTs work well across multiple counterparties.

SWIFT said in a release accompanying the announcement of the paper that it will look to advance its work with the financial industry to help build the foundation of a production grade DLT through Innotribe, its innovation arm.  Current initiatives, according to the paper, focus on identity and access management, standing settlement instructions and ISO 20022.