The Monetary Authority of Singapore (MAS) and the Association of Banks in Singapore (ABS) have collectively harnessed blockchain technology in a new prototype for inter-bank payments. The project was done in collaboration with a consortium of eleven other financial groups and five technology venues.

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The composition of the consortium includes Bank of America Merrill Lynch, Citi, Credit Suisse, DBS Bank Ltd, HSBC Limited, J.P. Morgan, Mitsubishi UFJ Financial Group, OCBC Bank, Singapore Exchange, Standard Chartered Bank, and United Overseas Bank.

By extension, Accenture was appointed to manage and develop the prototypes, with R3, IBM, and ConsenSys engaged in provide support on the respective Distributed Ledger Technology (DLT) platforms of Corda, Hyperledger Fabric and Quorum. Microsoft was tasked to support the deployment of the prototypes on Azure Blockchain.

Phase two of development

Heading a consortium, both MAS and ABS have developed a new software module that enables decentralized inter-bank payment and settlements with liquidity savings mechanisms. The software is already in Phase 2, which is seeking to explore the use of DLT, more commonly referred to as blockchain technology.

The consortium’s use of blockchain technology is aimed at improving clearing and settlement of payments and securities. By harnessing blockchain technology, the group is hoping to streamline inter-bank payments through the use of a three-model software system.

Sopnendu Mohanty, Chief FinTech Officer, MAS, commented, “A key outcome of the consortium’s effort is the ability to perform netting while protecting the privacy of transactions. This helps to open up opportunity for a wider adoption of DLT-based settlement systems.”

A game changer?

The initiative could be a game changer for central banks and financial institutions embarking on the use of DLT. Many institutions have expressed an openness and willingness to adopt such technology over legacy systems.

Such a system upon its completion would constitute one of the industry’s first decentralized netting of payments – payments settled in this manner would also help preserve transactional privacy, a huge draw and goal of the project, tapped Project Ubin.

Traditional netting programs in inter-bank payments have relied on the use of a single payment queue visible to the operator to find offsetting payments. However, by harnessing decentralized schematic, this can allay any possibility of potentially exposing payment details to an unauthorized party.

Prototype to debut at Singapore FinTech Festival

The latest models have already looked to achieve dramatic results and a superior blend of decentralization and privacy. Looking ahead, Accenture will be publishing a report of Ubin’s recent project findings and details of the software prototype currently in development. The group is targeting a release this November at the Singapore FinTech Festival.

“We are sharing our learnings and knowledge from Project Ubin to encourage greater experimentation amongst central banks and financial institutions. We look forward to working with other central banks on the use of DLT for cross-border applications,” explained Mr. Mohanty.

“Project Ubin has brought the banks together in experimenting with DLT in a collaborative, open and transparent manner. We see immense benefits from a successful industry collaboration that creates a vibrant ecosystem. We are encouraged that this outcome could potentially be leveraged on by the banks to catalyse the development of more innovative solutions,” noted Ong-Ang Ai Boon, Director, ABS.