point. A bank can pay into B2B Connect, Making waves All of this happens within one or two sec- and Visa will pass the payment onto the But the biggest threat to SWIFT’s onds – faster, cheaper and less compli- final counterparty, removing the need supremacy and the largest DLT-utilising cated than the current process with for multiple intermediary banks. payments initiative is still Ripple. Ripple end-to-end visibility and rich informa- claims to be a real-time gross settlement tion exchange. The advantages, according to the devel- opers, are familiar from the claims of system (RTGS), currency exchange and The benefits for treasurers are clear: set- GPI: predictability and transparency – remittance network that uses a sub-set of tlement risk is almost completely elimi- banks and their corporate clients receive blockchain technology called Interledger nated (risk remains if banks are not near real-time notification and finality of Protocol (ILP). operating at the same time); Ripple’s auc- payment; security – signed and crypto- So what happens in a Ripple transac- tion system assures best FX execution; graphically linked transactions are tion? (You can find out on YouTube.) counterparties in the transaction chain designed to ensure an immutable system Ripple still uses the idea of correspond- can be limited to those who match pre- of record; and all parties in the network ent banking. So in a transaction between specified compliance criteria; Ripple are known participants on a permis- two institutions there still sits an interme- uses standard ISO and MT messaging sioned private blockchain architecture diary bank. These are the key stages: (which of course means it is subject to that is operated by Visa. some of the same limitations as SWIFT); The originating bank sends there is no loss of data in the transactions Are these claims true? We will know out a request to the beneficiary – meaning higher auto-reconciliation when Visa rolls out the pilot and time 1 bank and correspondent bank rates and all fees and costs are known will tell if it emerges as a real competitor to obtain their processing fees upfront. to SWIFT on SWIFT’s home ground. and, if required, FX rates. Also, corporates using Ripple are only As an aside, Mastercard added block- indirectly exposing themselves to a Fin- chain APIs to its developer site to “facil- Pre-transaction validation: Tech start-up because their banks, not itate new commerce opportunities for 2 this includes compliance screening and account verifi- they themselves, are the counterparties the digital transfer of value”, following cation checks. Since all parties in the network. Treasurers are still inter- Visa’s announcement that the B2B Con- have this information, they acting with trusted bank partners. nect pilot would start this year. Master- can pre-validate the transac- Card has, however acquired VocaLink, tion to ensure STP. Is blockchain the answer? the operator of UK ACH clearing which For Ripple to become a significant alter- is a partner in many immediate pay- The originating bank accepts native to the existing infrastructure, the ments schemes worldwide, including the 3 the best quote for which they blockchain has to be proven suitable for US, Singapore, the UK and Sweden. can meet the compliance the purpose. Plenty of people say that it is This is a shrewd move as VocaLink requirements. The benefi- not. So, as explained above, SWIFT is understands both ACH and card pay- ciary bank can then lock the exploring a blockchain PoC but in ments and has experience of corporates. quote. At this point Ripple ini- announcing that initiative it also says that While the components don’t yet fit tiates a hold on the funds in “whilst existing DLTs are not currently together, watch this space. the banks’ ledgers. mature enough for cross-border payments The ILP ledgers generate this technology, bolstered by some addi- 4 cryptographic signatures to tional features from SWIFT, may be verify that funds are commit- interesting for the associated account rec- ted to the transaction. The onciliation,” says Wim Raymaekers, funds are simultaneously Head of Banking Market and SWIFT released across all the parties’ GPI at SWIFT. “This PoC gives us the ledgers ensuring no settlement opportunity to test DLT and determine if risk. it can be applied to this particular use case.” It will initially show early results at Upon completion Ripple pro- the Sibos meeting in Toronto. 5 vides a confirmation message to all parties. 18 // TREASURY PERSPECTIVES 2017/2018 www.eurofinance.com