The Technology giant IBM is one of the fore-runners in implementing their own Blockchain which is a distributed ledger that can hold all the financial transaction details in the form of blocks that are linked together and secured through cryptography. The company has announced a customized solution for banks to make cross-border payments faster using their IBM Blockchain technology. They have partnered with the payment company KlickEx and Blockchain startup Stellar for developing this solution which can reduce the settlement time and transaction cost for global payments.
Cheaper and faster Cross-Border Payments
At present, it takes anywhere from few days to several weeks for international transactions to get processed by banks which can be really frustrating for businesses. Services like TransferWire, American Express or Western Union Money Transfer are rather good for savvy customers, but not suitable for small businesses which cannot afford the huge transaction costs. Overall the existing global payment solutions are time consuming, costly and error-prone. If the transactions involves different currencies, then it will require multiple intermediaries which increases the processing time. A Blockchain solution is highly secure and can reduce the transaction costs associated with such cross-border payments and also provides the flexibility and transparency to banks.
The payment solution from IBM is already effective and processing live transactions in 12 countries across the Pacific Islands, United Kingdom and Australia. IBM is using a Blockchain distributed ledger to make the settlement of financial transactions faster. The blockchain can record the terms of the contract, manage trade documentation, obtain letters of credit, help the business owners to put up collateral and finalize transaction terms with immediate payment. This will make global trades relatively easier and transparent. The solution is expected handle almost 60% of the cross-border payments from the retail industries across the South Pacific by 2018 and will expand further.
Several international banks have already partnered with IBM for this solution which includes Wizdraw (KH) of WorldCom Finance, TD Bank, Rizal Commercial Banking Corp. of Philippines, National Australia Bank, Bank Rakayat Indonesia, Mizuho Financial Group, Banco Bilbao Vizcaya Argentaria, Kasikornbank Thailand,Bank Negara Indonesia, Danamon Indonesia, Sumitomo Mitsui Financial Group and several others.
The payment solution is developed using the IBM Blockchain platform which is based on the open source Hyperledger Fabric. This payment solution can help in settlement of trades on a single network in real-time. The private blockchain Stellar handles the actual settlement of transactions through issuance of digital asset while KlickEx adds their expertise in cross-border payments to the solution.
IBM has also partnered with Walmart, Kroger, Nestle and others to improve the food safety by using Blockchain technology which can help to enhance traceability and transparency. Big Blue has already been forging blockchain collaborations with several exchanges like the Memphis-based cotton exchange and London Stock Exchange. IBM has more than 1,600 employees working in the Blockchain and distributed ledger technology across all sectors.
Bridget Van Kralingen, Senior VP of IBM Industry platforms announced in a statement that IBM is exploring new ways to make payment networks more transparent and efficient such that transactions can happen in real-time even across remote locations, by partnering with leading Financial institutions.