​Westpac joins SWIFT's blockchain proof of concept

The Australian banking giant is one of 22 new additions to SWIFT's blockchain proof of concept being built with input from ANZ Bank.

Financial messaging service SWIFT has announced 22 global banks have joined its blockchain proof of concept, designed to validate whether the technology can help banks reconcile their international nostro accounts in real-time.

Westpac is the only Australian bank joining the consortium that now comprises Deutsche Bank, JPMorgan Chase Bank, Lloyds Bank, Standard Bank of South Africa, and others.

Launched in January, the proof of concept is still under development by SWIFT and a group of six founding banks that launched the blockchain concept earlier in the year, which includes the Australia and New Zealand Banking Group (ANZ), BNP Paribas, BNY Mellon, DBS Bank, RBC Royal Bank, and Wells Fargo.

Working independently of the founding banks, it is expected the 22 banks will test and validate the blockchain application and evaluate how the technology scales and performs.

"Collaboration is the cornerstone of innovation," said Wim Raymaekers, SWIFT Head of Banking Markets and SWIFT gpi. "This new group of banks allows us to greatly extend the scope of multi-lateral testing of the blockchain application and thus add considerable weight to the findings."

According to SWIFT, currently, banks cannot monitor their account positions in real-time due to lack of intraday reporting coverage -- a downfall the proof of concept is hoping to fix.

In developing the proof of concept, SWIFT is leveraging Hyperledger Fabric technology, combining it with SWIFT-owned assets in a bid to ensure that all the information related to nostro and vostro accounts is kept private and seen only by the account owner and its correspondent banking partner.

SWIFT said the proof of concept application will use a private permissioned blockchain in a closed user group environment, with specific user profiles and strong data controls. User privileges and data access will also be strictly governed, the cooperative said.

The blockchain application will undergo testing over the coming months, with the results scheduled to be published in September and presented at Sibos in Toronto in October.

The blockchain proof of concept is part of the SWIFT global payments innovation (gpi) service, which SWIFT explained is the new standard for cross-border payments.

The first phase of SWIFT gpi focuses on business-to-business payments, aimed at helping corporates grow their international businesses.

"SWIFT's global payments innovation studies continue to find ways to reduce time-consuming processes, as well as providing a superior experience for end customers," said Di Challenor, general manager of Global Transaction Services at Westpac.

"Combined with Westpac's other cross-border payment [proof of concepts], this holds great promise for transformation across the entire international payments value chain."

In October, the Commonwealth Bank of Australia, in partnership with Wells Fargo and Brighann Cotton, claimed the first interbank trade transaction combining blockchain technology, smart contracts, and IoT.

NAB Ventures, the venture capital fund of the National Australia Bank, led a $24 million Series B investment round for foreign exchange startup Veem in February. The San Francisco-based startup uses blockchain technology to perform cross-border business-to-business payments that are settled and sent in respective local currencies.

Australia's incumbent telco carrier Telstra also announced in September it was experimenting with a combination of blockchain and biometric security for its IoT smart home offerings.

In addition, a project using a shared, distributed ledger that can store complete transaction history has almost been completed by the Australian Securities Exchange (ASX). The exchange said recently that its blockchain initiative is on track for a final decision in the second half of 2017, with the prototype complete and the ASX moving to build an "industrial-strength solution" to use as its equity settlement, asset registration, and clearing platform.

Similarly, the Sydney Stock Exchange announced a project recently that would see it instantly settle trades using blockchain technology with the help of Sydney-based Bit Trade Labs.

Last year, SWIFT found itself in the centre of a $81 million bank heist, after a group of cyber attackers broke into the computer systems of the Bangladesh central bank in February and issued instructions through the SWIFT network to transfer $951 million of its deposits held at the New York Federal Reserve Bank to accounts in the Philippines and Sri Lanka.

The group responsible, dubbed Lazarus, was foiled when a typographical error was spotted by an employee that raised the red flag needed to prevent additional transfers going through.