Swift has announced the names of the six banks with which it will soon be carrying out a blockchain proof of concept (PoC) for nostro reconciliation as part of its global payments innovation (gpi) initiative.

The announcement, which also revealed the specific technology that Swift will be using, came as the Swift Business Forum 2017 took off in London this morning.

“The question I’m sure is on all of your minds is: do you have a demo of it yet?” Andrew Sheridan, Swift’s gpi innovation market manager, told the audience at a session dedicated to ‘showcasing’ the company’s new concept based on distributed ledger technology (DLT).

“The answer is no. Because we haven’t developed it,” he added.

Instead, the rather disappointed audience will have to wait till the Sibos conference in October, where Swift is hoping to have something ready to show the world.

In the meantime, it will be testing the technology with six banks: ANZ, BNP Paribas, BNY Mellon, DBS Bank, RBC Royal Bank and Wells Fargo.

Since Swift first launched the PoC last year, it has been working with the six banks on the initial preparations. The actual testing will begin in late June, Sheridan said.

In addition, 20 financial institutions are expected to join the programme later down the line to help further validate and test the concept.

“We are testing with six, and that gives us the baseline as to how the technology performs,” he said. “But we wanted a separate set, a control group of banks, that will test the application independently, so we can see how the technology scales in a multilateral use case.”


Hyperledger Fabric v1

The PoC application will use a private permissioned blockchain in a closed user group environment. It will leverage the technology of Hyperledger Fabric v1, a platform that was released earlier this year, and which Swift had been very “keen to use”, said Damien Vanderveken, head of research and development, SwiftLab and UX at Swift, who also attended the session today.

Part of the third phase of Swift’s gpi, the PoC will specifically be focused on helping banks reconcile their nostro account in real time. A nostro account is one that a bank holds in a foreign currency in another bank.

“Reconciliation is a manual process that normally today happens at the end of the day,” Sheridan said at the session. “But if you can have that real-time view during the day, then you can actually make critical business decisions about how much liquidity you can release.”

DLT thus has the potential to optimise financial institutions’ global liquidity. But the potential is one thing; another is whether the banks will utilise the benefits of the technology.

“What we have provided here is a tool; we give an insight,” Vanderveken said. “To have the benefit of the proof of concept you still have to make use of that liquidity. That’s what we are keen to test with those participating banks: To get their feedback on, does it really give them business benefits? Does it allow them to save on the liquidity front?”

Swift’s announcement comes a few months after it rolled out the first phase of its gpi payments service, which is now open for live payments between 12 banks, with many more set to adopt the service in May.

Although Swift had first been criticised for not involving blockchain technology, which is seen in the industry as the future of cross-border payments, with the new PoC it seems to be trying to catch up in the race for innovation.