JPMorgan has expanded blockchain-based payments to more than 75 international financial institutions in an effort to ease processing times for non-traditional payments.
The move shows a widening acceptance of blockchain, the burgeoning ledger technology and its application in the banking and financial services industry.
According to reporting by Financial Times (paywall), more than 70 banks, including Société Générale and Santander, are now testing the Interbank Information Network, or IIN. Per the report, JPMorgan, Royal Bank of Canada and Australia's ANZ have been testing IIN for nearly a year to see if it can help increase processing time for non-traditional payments.
The IIN is a shared ledger for cross-border payments, which are payments made between financial institutions in two different countries. The idea behind the IIN is that a shared ledger across institutions would decrease the time needed to resolve issues like compliance checks, bad addresses or incomplete data, which can tie up payment processing time.
FT reported that the banks expect to put about 14,500 U.S. dollar-denominated payments a day through the network.
From the article:
“Payment is one of the segments banks worry most about in terms of ceding to non-bank competition,” said Jason Goldberg, banks analyst at JPMorgan. “Blockchain is a way to keep more of that [payments business] in-house.”
There is no comprehensive data on how much market share has been won by payments start-ups using technology to offer cheaper services but individual companies have achieved significant scale, including UK-based TransferWise, which processes more than £3bn in payments every month. Emma Loftus, head of global payments and receivables at JPMorgan Treasury Services, said the IIN would help protect its businesses.
“One of the complaints that the non-banks have been pointing out [relates to] these frictional processes in the existing cross-border payment mechanism,” she said. “Given that things like blockchain are addressing some of these age-old problems, we’re able to solve the problems ourselves.”
The network is built on Quorum, an ethereum-based blockchain network, according to previous reporting by Coindesk. The technology enables multiple users to access and update the distributed ledger in real-time, minimizing time needed for processing and problem-solving.
“If you look at [IIN] in terms of what blockchain applications are live, there are very few and most of them are either in pilot or proof of concept stage,” Umar Farooq, head of blockchain at JPMorgan, told FT. “This is the single biggest.”
