Earlier this year, IBM unveiled its “Blockchain as a Service” based on Hyperledger Fabric, creating a public cloud service for customers to build secure blockchain networks.
Now the tech company announced they’re teaming up with payment company KlickEx Group and blockchain startup Stellar to change up the cross-border payment game.
The team is launching a blockchain-based system for banks, aimed to lower the cost and reduce settlement time for global payments for both businesses and consumers. International transactions typically take days, or even weeks, to complete.
Blockchains could speed things up, minimize errors, and provide more flexibility and transparency to banks. According to IBM, the collaboration “is intended to improve the speed in which banks both clear and settle payment transactions on a single network in near real time.”
In case you forgot what blockchains are, here’s a refresher course. Blockchains are a secure digital ledger of transactions with bits of information stored across multiple nodes in a network.
Since there’s no centralized hub, it’s less vulnerable to hacking.
Any time an action is taken, the ledger updates and that data is available to anyone with access to the blockchain. Additionally, each transaction is secured with digital signatures and encryption, providing transparency and security.
Blockchains can be used to trace and track transactions along every step of the way, providing a handy place to combine all product information besides just financial dealings.
For example, IBM suggested a hypothetical in which their system connects a Samoan farmer with an Indonesian buyer.
In this transaction, they stated, “the blockchain would be used to record the terms of the contract, manage trade documentation, allow the farmer to put up collateral, obtain letters of credit, and finalize transaction terms with immediate payment, conducting global trade with transparency and relative ease.”
Instead of scattered information, blockchains collect all relevant steps in a transaction. Currently, they system is used in twelve currency corridors, including New Zealand and the UK, as well as Australia and the Pacific Islands.
Within the next year, the system is expected to handle 60 percent of the South Pacific’s retail industry’s cross-border payments.
Bridget van Kralingen, Senior VP of IBM Industry Platforms, said in statement, “with the guidance of some of the world’s leading financial institutions, IBM is working to explore new ways to make payment networks more efficient and transparent so that banking can happen in real-time, even in the most remote parts of the world.”
Over a dozen banks are part of the initial pilot program, and plan to expand to Southeast Asia, South America, and other areas by early next year.