IBM’s deal with Stellar.org and KlickEx Group based on blockchain technology is set to revolutionize the global payment system, affecting businesses and consumers alike. This cross-border initiative is expected to reduce transaction costs in global payments as well as enhance efficiency.
IBM’s project is a key driver based on blockchain technology
IBM’s venture with KlickEx and Stellar is one of a series of blockchain projects launched by IBM. They include foreign exchange payments netting, private equity administration, securities lending and trade finance. The project with KlickEx and Stellar has started in the Pacific Island Region but this payment solution has been crafted to expand globally, making worldwide banks partners.
The project is based on IBM’s blockchain technology to offer clearing and settlement of trades converging towards a single network in real time. KlickEx’s input will be its expertise in cross-border payment transactions while Stellar, will handle the issuance of digital assets on the blockchain to drive the settlement features.
The newness of this solution is to blend “disjointed functions” such as payment messaging, clearing, and settlement together. Up to now, these functions were distinct and separate in banking systems. The incorporation of the Hyperledger Fabric will allow driving the payment messaging and clearing feature, facilitating cross-border transactions, clearings as well as settlements on a solo network within seconds.
Making global transactions affordable and accessible to all
This venture supports the World Bank’s initiative in aiming at allowing adults who are actually not part of the formal financial system, to gain access to a proper transaction account to send, receive, and store money by 2020. Up to now, targeted interventions on behalf of the World Bank and the IFC have been allowing people worldwide to gain access to transaction accounts. The goal is to enable 1 billion people to gain this kind of access. However, this mission is achievable only if initiatives are taken to modernize payments to provide financial access.
Today’s bleak reality is that making international payments in developing countries is expensive, painstaking and error-prone. Transactions in different currencies are even more problematic, requiring several intermediaries; they generally take days or even weeks to complete. IBM’s universal blockchain system can not only improve the flow of both capital and commerce through reduced friction but also give a drastic boost to economies. Concerned parties in a network can monitor creation and progression of every single transaction in real time.
Blockchain technology can facilitate global trade
The upshot is that records are secure as they are immutable, presenting lower costs for banks, supplementary revenues for businesses and flexible access for individuals. As IBM explains it, this same universal blockchain payments solution could make it possible for a farmer in Samoa, for instance, to trade directly with a buyer in Indonesia in the future. The blockchain system could be used not only for payments but to record terms of contracts and manage trade documentation too, with immediate payment. This will undeniably bring transparency and convenience in global trade.
This year, a number of international commercial banks players across Asia and the South Pacific region forming part of the network will be requested to join forces to help steer expansion of the new payments network to different parts of the world, creating currency corridors. Worldwide, IBM’s venture is being acclaimed and receiving support from banks too.