IBM on Monday is unveiling a blockchain network for cross-border payments -- the first international payments network of its kind.
"This marks a next phase in the evolution of making enterprise blockchain a reality," Jesse Lund, IBM's VP of global blockchain market development, told ZDNet. "This is kind of a paradigm shift that is happening. The promise of what digital currency teased us with -- what networks like Bitcoin teased us with -- is actually coming to enterprise scale and coming to maturity."
Currently, cross-border payments involving different currencies can take days or even weeks, requiring multiple intermediaries. By contrast, this new network uses IBM Blockchain technology to provide both clearing and settlement of trades on a single network in real time.
It's currently up and running on a regional basis, facilitating monetary transactions in 12 corridors across the Pacific Islands, Australia, New Zealand and the United Kingdom. While the network is supporting live transactions, they're occurring in a very controlled environment, Lund said. IBM will work with one of its partners, the regional financial services company KlickEx Group, to evaluate the characteristics and scalability of the network and judiciously ramp up volume.
"This is the first time anyone has made blockchain work at an institutionally viable scale," Robert Bell, founder of KlickEx Group, said in a statement.
To launch the network, IBM partnered with KlickEx Group, as well as with Stellar.org, a nonprofit organization that supports an open source blockchain network for financial services.
IBM provides high performance orchestration to transfer payments. Each payment is immutable once recorded, and settlement instructions are provided via smart contracts on Hyperledger Fabric. Initially, Stellar will provide the network to facilitate the settlement of transactions cleared on Hyperledger.
The network launched in the Pacific region because of the relatively low payment volume there, which presents less risk, Lund explained. The initial launch will give IBM and its partners a way to develop a commercial and governance model that takes into consideration the regulatory concerns of the banking industry.
IBM will work with regulators and Promontory, an IBM-owned financial regulatory consulting firm, to expand the network. IBM has also convened an initial group of leading banking institutions to advise on how to bring the network into new jurisdictions. These firms include National Australia Bank, Rizal Commercial Banking Corp. (RCBC) Philippines, Sumitomo Mitsui Financial Group, TD Bank and Wizdraw (HK) of WorldCom Finance.
"What you're seeing is a marker in the evolution of enterprise blockchain technology becoming viable and acceptable within the global banking establishment, and that's a big deal," Lund said.
While a number of factors could impact the adoption of blockchain technology within the banking sector, Lund predicted a "drastic shift in the construct of payments infrastructure" within the next five years.
"As a whole you're going to see a whole new wave of international payments solutions coming to market," he said.