SWIFT completes landmark DLT PoC
• PoC successfully delivers business functionalities
• DLT instance meets governance, security and data privacy requirements
• ISO 20022 data model and UETR pivotal to improving Nostro processes
• DLT a strategic priority for SWIFT
Read the news about SWIFT's DLT proof of concept.
Brussels, 8 March 2018 – SWIFT publishes today the final results from its DLT proof of concept for Nostro reconciliation, one of the largest and most ambitious proofs of concepts run with the emergent technology.
With 34 participating banks each with their own node deployed in the SWIFT DLT sandbox, the initiative was one of the most extensive blockchain proofs of concept powered by Hyperledger Fabric 1.0 executed in the industry so far, both in terms of participant engagement and in terms of the scale of the infrastructure deployed.
With the PoC SWIFT set out to work with the technology in a “many-to-many” setting addressing a real business issue, and draw lessons for larger scale implementations of the technology in the bank-to-bank payment area. The PoC sought to assess whether DLT, combined with SWIFT assets, would meet industry-level governance, security and data privacy requirements, whether DLT could bring concrete benefits over other architectures, and to check DLT’s current level of maturity to serve as a production-grade application within a mission-critical global infrastructure.
Based on the business and technical requirements validated by the participating banks, SWIFT developed a DLT solution through which Nostro Account owners and their servicers could share a private confidential ledger recording transactions related to their Nostro accounts. The solution leverages ISO 20022 standards [*] and gpi innovations [*] – including the unique end-to-end transaction reference (UETR) – and integrates intraday liquidity standards.
The PoC showed that DLT could deliver the business functionalities and data richness required to support automated real-time liquidity monitoring and reconciliation. It enabled real-time event handling, transaction status updates, full audit trails, visibility of expected and available balances, real-time simplified account entries confirmation, the identification of pending entries and potential related issues, and generated the data required to support regulatory reporting.
The PoC also demonstrated the significant progress DLT has made with regards to data confidentiality, governance, security, and identification frameworks, evidencing that the emergent technology, combined with SWIFT assets, provides the necessary foundation for financial multi-bank applications.
“The PoC went extremely well, proving the fantastic progress that has been made with DLT and the Hyperledger Fabric 1.0 in particular”, said Damien Vanderveken, Head of Research and Development at SWIFT. “The DLT sandbox enabled us to control access, to define and enforce user privileges, to physically segregate confidential data and store it only with the relevant parties while supporting a strong identity framework by linking all participants to their BIC, and having all keys signed by a SWIFT certification authority”.
While successfully meeting all the business requirements set out, the PoC evidenced the considerable pre-requisites for industry adoption of such a solution – for instance, all account servicers would first need to migrate from batch to real-time liquidity reporting and processing, and back office applications would need to be upgraded to feed the platform with real-time updates.
“Although the PoC demonstrated DLT could improve Nostro liquidity management and reconciliation processes, it also revealed that the pre-requisites will have to be met before banks can enjoy the full benefits of switching to a DLT process”, added Vanderveken.
To facilitate improvements in the Nostro process, SWIFT will continue helping its community migrate towards real-time liquidity reporting and processing through SWIFT gpi, and establish a roll-out plan for the community-wide adoption of the UETR. Similarly, as the PoC underscored, the ISO 20022 data model is a pre-requisite to deliver the required structure and data richness to support real-time liquidity monitoring and reconciliation. SWIFT will also initiate an ISO 20022 consultation with its community to assess a timeline and a migration approach towards ISO 20022 as a potential means to reduce integration costs, and will continue to actively promote the re-use of ISO 20022 in the DLT context.
The PoC also showed that further progress is needed on the DLT technology itself before it will be ready to support production-grade applications in large-scale, mission-critical global infrastructures. For example, while 528 channels were required in the PoC to ensure Nostro accounts would only be stored on the nodes of their account servicers and owners, to productise the solution, more than 100,000 channels would need to be established and maintained, covering all existing Nostro relationships, presenting significant operational challenges.
“It is a strategic priority for SWIFT to work with new technologies like DLT and incorporate them into key solutions like gpi”, said Stephen Gilderdale, Chief Platform Officer, SWIFT. “We are already working on new PoCs and will continue our R&D efforts to ensure that SWIFT customers will be able to leverage their existing SWIFT infrastructure and connectivity to benefit from blockchain services, whether offered by SWIFT or by third parties, on a secure and trusted platform.”
SWIFT is a global member owned cooperative and the world’s leading provider of secure financial messaging services. We provide our community with a platform for messaging and standards for communicating, and we offer products and services to facilitate access and integration, identification, analysis and regulatory compliance. Our messaging platform, products and services connect more than 11,000 banking and securities organisations, market infrastructures and corporate customers in more than 200 countries and territories. While SWIFT does not hold funds or manage accounts on behalf of customers, we enable our global community of users to communicate securely, exchanging standardised financial messages in a reliable way, thereby supporting global and local financial flows, as well as trade and commerce all around the world. As their trusted provider, we relentlessly pursue operational excellence; we support our community in addressing cyber threats; and we continually seek ways to lower costs, reduce risks and eliminate operational inefficiencies. Our products and services support our community’s access and integration, business intelligence, reference data and financial crime compliance needs. SWIFT also brings the financial community together – at global, regional and local levels – to shape market practice, define standards and debate issues of mutual interest or concern. Headquartered in Belgium, SWIFT’s international governance and oversight reinforces the neutral, global character of its cooperative structure. SWIFT’s global office network ensures an active presence in all the major financial centres.
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[*] ISO 20022 is a multi part International Standard prepared by ISO Technical Committee TC68 Financial Services. More here.
[*] SWIFT gpi is the new standard for cross-border payments. More on SWIFT gpi can be found here.