IBM Blockchain cross-border payments to radicalize existing systems

IBM’s collaboration with KlickEx Group, a Polynesian payments system provider, and Stellar.org, an open source FinTech payment network, will start a new electronic currency exchange network and see a change in the way banks carry out their cross-border payments by using IBM’s Blockchain Platform.


Pacific nations to get new services

This new network that uses the blockchain platform will implement a cross-border electronic exchange of twelve different currencies covering the Pacific Islands, Australia, UK and New Zealand. This will enable faster cross-border payment services with the feature to transfer the funds directly to mobile wallets. Both KlickEx and Stellar are supporting this payment service. The cross-border payments system will provide the scope of clearing and settlement of digital assets like central bank issued digital currencies and securities.

What is Blockchain Technology?

Blockchain, developed by Bitcoin, is an electronic ledger technology used to make faster and secure cross-border payments. It is a distributed database maintaining a list of shared records. These records, also known as blocks, let the users keep a track of the digital currency transactions without keeping a central record. Data on a blockchain can be accessed by anyone on the internet as it is incorruptible.

Similar to a relational database, transactions recorded on the electronic ledger can be shared among distinct users to create a record of their transactions and all transactions are lined and linked to the previously recorded transaction. Each record or block is linked to a specific user, which allows them or set of users to participate in the electronic ledger.

Once new data is entered it cannot be erased and the existing data can only be updated by the consensus of the participants in the blockchain system. Each record or transaction shared in the system is verifiable.

IBM’s Blockchain creates secure networks

IBM’s Blockchain service is based on an open source Hyperledger Fabric Technology. It is a cloud-based service for users to create secure networks on the blockchain. It is a more trusted platform to perform business transactions globally by securing payments. IBM aims to develop enterprise-ready blockchain solutions to overcome issues related to privacy, scalability, audit-related governance and confidentiality. IBM introduced its blockchain service by teaming with KlickEx, a financial service company, and Stellar.org, an open source blockchain network supporting financial services.

Initiated by IBM, this project includes security lending, private equity administration, forex payments netting and financial trading. It is designed to serve businesses and consumers globally to provide both clearing and settlement of trades within seconds on a single network. KlickEx excels in cross-border payment transactions while Stellar takes care of the settlement component.

It is designed to reduce the cost of making global payments and improving efficiency for consumers and businesses for developing nations as well. Several banks in the Pacific region have participated in the blockchain exchange ledger. These include Bank Permata, Bank Rakyat Indonesia, Bank Negra Indonesia, Bank Danamon Indonesia, Bank Madiri, TD Bank, National Australia Bank, Mizuho Financial Group and Wizdraw of WorldCom Finance. These institutions will help expand the distributed ledger’s use in other parts of the world through their collaboration with IBM.

FinTech and Blockchain to serve eight countries

According to Robert Bell, CEO of KlickEx, the adoption of the blockchain platform will improve his company’s scalability and resilience to an electronic exchange. The company’s previous electronic exchange had enabled mobile payments but had limited scalability. In its Pacific region, KlickEx is able to serve to approximately 80% of the households.

Earlier, the payments were processed batch wise and the payment received would outdo the payments issued but with the implementation of the blockchain service, KlickEx has pushed to a capacity of approximately 8 million payments per day as compared to its earlier service of one million users per day spanning 8 countries.

Blockchain system users can log in to see when their money transfer has been cleared or accepted, like by a merchant or a local grocery store. Apart from improved scalability, the distributed nature of the new blockchain based system helps in attaining and verifying data for every country it serves, keeping a check on the regulatory norms.

Other projects proposed in IBM’s venture

IBM’s venture with KlickEx and Stellar.org is not its first cross-border venture. Prior to this, IBM, Standard Chartered, and AIG had announced a pilot project to streamline a multinational policy in the insurance industry using blockchain based payment system.

According to Saurabh Gupta of Genpact, blockchain and distributed ledgers may integrate the commercial world’s record keeping.

It is expected to pave the way for more currency corridors apart from the existent 12 with increasing transaction volumes and network expansion.

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