SWIFT to trial blockchain – but not for its core payment service
Hopes to streamline market data movements, but as 11,000 institutions use SWIFT this is a bit of a moment
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) has announced it will try to hook its 11,000 members to a blockchain – but not for its payment service.
The Register last touched on SWIFT when reporting it had withdrawn its services from Russian entities – an action that highlighted the Society's vital role in facilitating international money movements. So does the fact that China sees international acceptance of its digital currency as giving it the chance to create an alternative to SWIFT and challenge its dominance.
TL;DR: SWIFT is important, and its enormous membership makes it influential.
And now it wants its members to adopt a blockchain.
"When an event takes place at a publicly traded company – dividend payments, exchange offers, mergers, Dutch auctions or other corporate actions – the information needs to be quickly shared with investors, creditors and all other key stakeholders," opens a statement SWIFT issued on Wednesday.
The statement adds that institutions have tried to automate their handling of such messages, but remain "heavily dependent on manual processes that create both added costs and risks for market participants."
That's because the global financial system has many participants, and many have their own data standards that other players must parse before they ingest or process info.
SWIFT strategy director Jonathan Ehrenfeld estimated that manual processing of data therefore accounts for around 30 percent of the costs involved in processing corporate actions.
The Society thinks blockchain might blow that away, so is piloting one using tech from an org called Symbiont, and its platform called Assembly.
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"By bringing Symbiont's Assembly and smart contracts together with SWIFT's extensive network, we're able to automatically harmonize data from multiple sources of a corporate action event," stated SWIFT chief innovation officer Tom Zschach. "This can lead to significant efficiencies. Corporate action data from SWIFT messages is processed by the SWIFT Translator and uploaded in Symbiont's blockchain. The smart contract technology can then compare information shared between participants and flag discrepancies, contradictions or inconsistencies across custodians."
"If the solution proves successful, intermediaries would need to field fewer queries from clients about corporate action data. It also means global custodians and asset managers could reduce the number of people who spend their time manually scrubbing corporate action data," Zschach added.
SWIFT is already developing apps based on Assembly "with a pilot group of participants that are set to test it and provide feedback in September."
The Society says feedback on those efforts will determine if it takes the idea further.
Many financial institutions are already blockchain-curious, or more advanced in their consideration or use of the tech. If SWIFT decides blockchain has a role in its world, 11,000 of the world's financial institutions and related players could be running one – a considerable boost to the tech and a big step away from its association with the seamy side of cryptocurrency and Web3. ®