Fintech company MonetaGo and Swift India are currently piloting a blockchain-based fraud mitigation solution with a number of Indian banks.
The pilot programme will see banks use Swift’s messaging service to pass information to and from MonetaGo’s fraud mitigation network, a blockchain-based solution launched in March this year. The application helps banks reduce fraud in receivables financing by enabling them to check if invoices have already been financed and verify the authenticity of electronic waybills.
The blockchain network enables a bank to hash certain elements of the invoice, create a unique fingerprint for it and then publish it to the network. The bank can then apply different states to the invoice, such as whether it has been registered or financed. MonetaGo is also working to add in other states, including whether an invoice has been registered with the tax authority.
Speaking to GTR, Jesse Chenard, CEO of MonetaGo, says: “Leveraging the Swift messaging infrastructure to pass messages back and forth to the blockchain that we already have in production creates a simple integration point for the banks, instead of having to integrate live APIs and figure out authentication and encryption mechanisms. It removes a lot of the complications around getting behind the firewall with each and every bank and creating a standard integration.”
The pilot through the Swift messaging format has been underway since last month, with four unnamed Indian banks now actively testing the solution.
According to Chenard, MonetaGo is also working to expand the solution to Latin America, with two countries expected to go live in the first quarter of next year. “I’m going to push for this to go through the Swift messaging terminals, because it’s a very elegant way of doing things,” he says, adding that he believes this is the first time that a solution combining Swift messaging with blockchain will go into production.
Swift has itself experimented with blockchain, exploring the use of the technology for real-time nostro reconciliation, although thus far it has not taken it further than a proof of concept. But with a new use case and location, Swift seems to now be giving blockchain another chance.
“Given India’s focus on a digital infrastructure which is supported by both policy and technological innovation, it makes sense that large institutional players are interested in these products and initiatives,” says Chenard. “This work is going to positively impact the information available to the banking industry at large.”
Double financing remains a major challenge for lenders worldwide, who have limited ways to check if an invoice has already been financed by another funder. Blockchain technology has been labelled as an ideal solution to this problem. A decentralised registry, like the one MonetaGo has created, enables financiers to cross-reference an invoice before committing to financing it, while keeping data private and secure, and could save the industry millions of dollars each year in fraudulent invoicing.
MonetaGo is not the only organisation leveraging blockchain to tackle this issue. Singapore-based fintech company Trade Finance Market recently launched the World Blockchain Trade Consortium (WBTC), which brings together non-bank financial players to combat trade finance fraud in a similar fashion, albeit through a proprietary application rather than using Swift’s messaging service. The success of blockchain ultimately relies on gaining critical mass from the industry, and MonetaGo’s pilot with Swift is the latest demonstration of growing interest from the financing community in adopting the technology for this particular use case.