IBM (NYSE: IBM), KlickEx Group, a regional financial services company, and Stellar.org, a nonprofit organization that supports an open source blockchain network for financial services, have announced a new regional cross-border payments solution. Designed to improve efficiency and reduce the cost of making global payments for business and consumers the solution uses IBM blockchain technology to provide both clearing and settlement of trades on a single network in real time.
The IBM universal payments solution is intended to simplify the way funds are exchanged around the world, and to reduce settlement time from days to seconds. The solution is already in production supporting transactions in 12 currency corridors across the Pacific Islands and Australia, New Zealand and the United Kingdom. It is being designed to augment financial flows worldwide, for all payment types and values.
National Australia Bank, TD Bank, Wizdraw (HK) of WorldCom Finance, and other financial institutions are participating by collaborating and advising in the development. In the future, this IBM universal payment solution is positioned to support central bank-issued digital currencies, securities, bonds and structured financial assets as well.
“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,” said Bridget van Kralingen, Senior Vice President of IBM Industry Platforms. “Making distributed ledger technologies more interoperable is the latest example of IBM’s leadership driving the rapid advancement of blockchain.”
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Central bank-issued digital assets
The universal payments solution runs on Hyperledger Fabric, with the Stellar network, an open-source blockchain network. The Stellar network is purpose-built for the issuance and exchange of digital assets. KlickEx Group serves as the founding financial institution for the region, servicing banks, retail clients and consumers.
Initially, Stellar will provide the network and digital asset to facilitate the settlement of transactions cleared on Hyperledger. However, financial institutions will be able to choose the settlement network of their choice or the exchange of central bank-issued digital assets.
“This new innovation and collaboration represents a significant milestone for Stellar as well as the financial technology industry as a whole,” said Jed McCaleb, co-founder of Stellar.org. “For the first time, public blockchain technology is being used in production to facilitate cross-border payments in multiple integrated currency corridors. Currently, our cross-border payments tended to take up to several days to clear. This new implementation is poised to start a profound change in the South Pacific nations, and once fully scaled by IBM and its banking partners, it could potentially change the way money is moved around the world, helping to improve existing international transactions and advancing financial inclusion in developing nations.”
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 will process up to 60 percent 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. Commercial banks will be invited to join the network and help it expand in different parts of the world beginning in 2018.
“This is the first time anyone has made blockchain work at an institutionally viable scale,” said Robert Bell, Chairman of APFII and founder of KickEx Group. “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. We look forward to the results using IBM Blockchain as we continue to push forward with our mission to remove payment friction across borders.”