At last week's Hong Hong Blockchain Week 2019 event (March 4–9), Lisa O'Connor, Head of Securities, Treasury, and Standards for Asia Pacific at financial messaging services provider SWIFT, spoke with CNBC's Crypto Trader, Ran Neuner, about her company's involvement with distributed ledger technology (DLT).
Some Background Information About SWIFT
On its website, the Society for Worldwide Interbank Financial Telecommunication (SWIFT), a co-operative which was founded in 1973 and is headquartered in Belgium, describes itself as "a global member-owned cooperative and the world’s leading provider of secure financial messaging services," and says that its "messaging platform, products and services connect more than 11,000 banking and securities organisations, market infrastructures and corporate customers in more than 200 countries and territories."
On 10 December 2015, probably as a response to the growing threat from Californian Fintech startup Ripple, SWIFT announced a global payments innovation (gpi) initiative to "dramatically improve the customer experience in correspondent banking by increasing the speed, transparency and predictability of cross-border payments." At the time, it said that gpi would enable corporates to "receive an enhanced payments service directly from their banks" with these features:
- "Same day use of funds"
- "Transparency and predictability of fees"
- "End-to-end payments tracking"
- "Transfer of rich payment information"
SWIFT said that the pilot for the gpi initiative would start in early 2016.
Currently, SWIFT claims that the benefits for banks and corporates that adopt gpi are as follows:
- Fast payments ("Credit international beneficiaries in seconds and, at most, minutes")
- End-to-end tracking ("Track payments end-to-end in real-time")
- Fee and FX transparency ("See bank fees charged and FX rates applied")
- Unaltered remittance information ("Ensure remittance data is unchanged when payment arrives")
- Reduced Costs ("Benefit from reduced enquiry costs due to ability to track payments")
- Optimised liquidity ("Make the most of your liquidity through greater payments visibility")
- Ease of implementation ("Use your existing SWIFT setup and go live within three months")
- Confirmed credit ("Receive a credit confirmation message when your beneficiary has been paid")
GPI Link Proof-of-Concept (PoC)
On January 30th, SWIFT announced that to "support the growing demand amongst trade ecosystems for secure and reliable settlement," it had "launched a proof of concept (PoC) to trial a new gateway to interlink trade and e-commerce platforms with gpi."
SWIFT also said that the "first stage of the PoC will work on R3’s leading blockchain platform, Corda, to bring the benefits of gpi payments" to DLT-enabled trades, and that the PoC "addresses the need for e-commerce and trade ecosystems to be supported by global, fast, secure and transparent settlement using fiat currencies by enabling ‘off-ledger’ payment settlement based on gpi."
The PoC will allow companies using the R3 platform to perform the following actions:
- "authorise payments from their banks via gpi Link";
- "settle gpi payments through their bank"; and
- "receive credit confirmations on the respective trade platforms via gpi Link on completion."
We also found out that SWIFT gpi is currently handling "over $300 billion in daily cross-border payments" with over 50% of these payments getting "credited to end beneficiaries within 30 minutes."
CNBC Crypto Trader's Interview With O'Connor
In last week's blockchain event in Hong Kong, Ran Neuner, who is the Co-Founder and CEO of Onchain Capital, as well as the host of CNBC Africa's Crypto Trader program, managed to catch up with the SWIFT executive and started the interview by asking her first to say a few words about SWIFT. This was O'Connor's reply:
"We are a co-operative, which has 11,000+ members globally... We are owned by those members... We are also the registration authority for the way that financial institutions speak to each other."
Neuner then asked O'Connor who those members were; she answered:
"They are banks, they are brokers, they are asset managers, they are corporates..."
Neuner's next question was: "Is SWIFT using blockchain or digital ledger technology?"
"So, we are selectively looking at the use of DLT. The reason that we're doing this is because our owners are also interested in that as a trend. So, they're looking at how do they leverage DLT for certain business problems. We don't think that DLT or blockchain is the answer to every problem. What we like to do first is to look at the problem and then apply the right technology as the solution."
She then proceeded to give a couple of examples:
"We're looking at it in Singapore for proxy voting, which is a big industry challenge that we face... We have worked with some large market infrastructures, like the Australian Stock Exchange, who are putting in place DLT for their new clearing and settlement system. We're also looking at it in other ways, but it's not just us looking at it.
What we would like to be in the future is a platform that helps to connect our members up to the best of these blockchain solutions. So we're working with, for example, R3 who's been doing a lot of work as it relates to trade finance, and how do we link together that trade finance value chain to the payment value chain that underpins it all."
Next, Neuner asked O'Connor if SWIFT was using blockchain technology for bank-to-bank foreign exchange transfers. She said:
"So, there is work that is going on from a market infrastructure perspective [by] our stakeholders who are looking at that. We would be very open to working with DLT platforms who are looking at that, but we are not in the market ourselves to do things like multilateral netting to do clearing of transactions. That's not what SWIFT does. At our core, we're a platform, and we're a place where we could connect up potentially to those infrastructures."