Blockchain solutions for the financial services and public sectors - overview
IBM scientists are working on blockchain solutions to help improve cross-border payments of banks and the efficiency of claims processing of insurers as well as to reduce the costs for shared “Know Your Customer” solutions.
Distributed Ledger Technology, commonly referred to as “blockchain”, is an emerging platform that has the potential to transform transactions between multi-party business networks, enabling significant risk reduction and innovative new business models. Blockchains allow business networks to create shared ledgers which are distributed and replicated to provide provenance, immutability and finality in the ownership and transfer of business assets.
IBM Research – Australia primarily focuses on blockchain solutions for the financial services and public sectors, specifically focusing on the following key use cases:
- Cross-border payments: Blockchain reduces payment reconciliation time and improves capital allocation and management within correspondent banking relationships.
- Shared “Know Your Customer”: Blockchain reduces costs associated with customer on-boarding, improves the customer experience and increases transparency and regulatory compliance in a manner that ensures customer privacy and consent.
- Insurance: Blockchain improves claims processing efficiency and customer experience as well as enables new business models through reliable pay-as-you-go schemes.
In addition to building innovative solutions, our team is also tackling research challenges related to data management and governance of blockchain solutions.
Featured project: Blockchain for cross-border payments in correspondent banking
When money is moved between banks across borders, separate ledgers are used by the correspondent and respondent banks for recording debits and credits. The accounts on these ledgers are called “nostro” and “vostro”, from the Italian “ours” and “yours”. A nostro account tracks foreign currency held in a foreign bank account, owned by a local bank. Conversely, a vostro account tracks local currency held in a local bank account, owned by a foreign bank. Traditional double-entry booking for managing the movement of money takes several days to settle, involves manual reconciliation and leaves idle capital in these accounts for most of the day. The video provided below highlights a blockchain proof-of-concept built by IBM Research – Australia that enables multiple banks to use a single shared ledger, thus eliminating double-entry bookkeeping. The solution removes the need to reconcile payments, reduces settlement time, and enables banks to better utilize capital.