Banks around the world are taking to block chain based clearance systems for cross-border transactions
State Bank of India (SBI) and the US bank JPMorgan have tied up for the use of latter’s block chain technology that will speed up overseas transactions.
SBI customers’ transaction costs and time taken for payments is expected to reduce by the tie up, sources said. From up to a fortnight to a few hours, the time taken to resolve cross-border payments-related inquiries can be reduced, they said. Using limited steps, this will help cross-border payments reach beneficiaries faster.
Venkat Nageswar, deputy MD – international banking group at SBI said, “We have undergone significant digital transformation in recent years and continue to add new technologies to create real value to daily operations”.
He said, “We are excited to be the first bank in India to go live on the network and look forward to closer partnership with JP Morgan on implementation and exploring application as part of the network to better serve our clients”.
JPMorgan said it will expand its block chain presence in India, a spokesperson said.
P D Singh, managing director and head – corporates and FI, JPMorgan Chase Bank, India said, “We continue to actively explore how emerging technologies can enhance our clients’ experience”.
The block chain technology Liink of JPMorgan is meant for a peer-to-peer network, with financial institutions, corporates and Fintech companies subscribing to it internationally, which will enable users to make secure as well as peer-to-peer data transfers with greater control and speed. Also, it will mitigate risks involved in cross-border transactions.
To exchange payments-related information with other financial institutions, SBI has integrated Liink into its operations.
Globally, about 100 banks are now live on the network. Talks are going on between many large local lenders, both government and private and JPMorgan on the same.
According to block chain experts, including lenders from China and Africa, banks around the world are taking to block chain based clearance systems for cross-border transactions. This is to get a first-movers’ advantage and to make such payments faster and cheaper.
Nitin Sharma, partner at Antler Global and previously the founder of Incrypt Block chain said, “The World Bank confirmed that bank-led remittances cost an average of 10% globally, which is really high. Projects like Ripple or various bank consortia have argued that a distributed ledger (or a new block chain) shared between banks directly removes the need for correspondent banking and can thus reinvent cross-border remittances or trade cash flows for the new age”.
A banking source said, “At least two Mumbai-headquartered private sector lenders and a large state-owned bank are in talks with JPMorgan”.
For adherence to regulatory norms at beneficiary location, going forward, Liink will also be able to allow participating banks to pre-validate an account even before making payments, and check message formatting. This process helps mitigate transaction rejection/frauds, a move that will garner more customer satisfaction.