Blockchain subverts the global payment system? SWIFT: We are also testing

Will blockchain technology, which is popular in IT, finance and even energy fields, really subvert the existing global cross-border payment system? At least SWIFT (Society for Worldwide Interbank Financial Telecommunication), which most countries and banks in the world cannot bypass in cross-border settlement, has reservations about this.

Will blockchain subvert the global payment system? Society for Worldwide Interbank Financial Telecommunication (SWIFT): We are also testing blockchain technology, which is popular in IT, finance and even energy fields. Will it really subvert the existing global cross-border payment system? At least SWIFT (Society for Worldwide Interbank Financial Telecommunication), which most countries and banks in the world cannot bypass in cross-border settlement, has reservations about this.

"From the perspective of SWIFT, the concept of blockchain, a distributed ledger technology, is good, but there are many problems that need to be solved in reality, such as network security issues and the computing power of blockchain," said Alain Raes, CEO of SWIFT Asia Pacific, Europe, Africa and the Middle East, in an interview with The Paper on July 21.

Alain Raes also said that SWIFT is also constantly testing and experimenting with blockchain technology, but since SWIFT serves financial institutions, it must be ensured to be safe, reliable and stable before it can be launched to customers.

In the eyes of blockchain supporters, blockchain has a disruptive significance for the payment industry, especially cross-border payments. With blockchain, payments will be made directly between two parties without involving intermediaries. Once the above idea becomes a reality, it will naturally mean a shock to SWIFT.

Founded in 1973, SWIFT is a non-profit organization established to address the problem that financial communications between countries cannot keep up with the rapid growth of international payment and settlement.

At present, SWIFT's messaging system connects more than 11,000 banks, securities institutions, market infrastructure and corporate users around the world, covering more than 200 countries and regions. At present, in international trade settlements, SWIFT letters of credit are formal, legal, and internationally accepted by all parties to the letter of credit.

At present, major banks around the world are actively engaged in the research and development and testing of blockchain. More than 50 large banks around the world, including Goldman Sachs, Citi, Deutsche Bank, HSBC, and Morgan Stanley, have joined the blockchain alliance led by the startup R3CEV. In May this year, Ping An of China (601318, Stock Bar) also joined the alliance, becoming the first member from China.

Regarding the high enthusiasm of banks, Alain Raes also expressed his views in the interview: "In our opinion, it is still unclear what benefits the full application of blockchain technology in the financial field will bring, but all financial institutions have seen that if they do not understand the latest technology in this financial field, they may be marginalized."

However, Alain Raes also admitted that "the user experience may not be particularly good" regarding the current cross-border settlement speed of one or two days or even longer.

Faced with the challenges of new technologies such as blockchain, Swift is unwilling to sit idly by and has begun to increase the speed of cross-border payments.

Earlier this year, SWIFT launched the Global Payment Innovation Initiative (GPII). Currently, 73 banks around the world have joined this project. The cross-border transactions conducted by these 73 banks through the SWIFT network account for nearly 75%.

"This project is not a subversion of the existing SWIFT message system, but a development of correspondent bank rules based on existing technology," Alain Raes emphasized.

The new program is envisioned to enable same-day funds, fee transparency, end-to-end status tracking, and the transmission of rich payment information.

Currently, the first phase of testing of the project has started in more than 20 banks, and Bank of China and Industrial and Commercial Bank of China have also participated in the first phase of testing.