R3 and 22 Large Banks Develop International Payments System

R3 announced today that it would work with 22 banks to create a real-time payments infrastructure based on its blockchain platform called Corda. The banks are part of a large consortium led by R3 and the prototype is expected to be ready by 2017.

R3, a blockchain-oriented FinTech company, is collaborating with 22 of the largest banks and financial institutions in the world to create an international payments network. The company announced today that the system would operate with fiat money and eventually Central Bank-issued digital currencies, and will allow transactions through a blockchain system.

Commercial and central banks agree that the distributed ledger technology (DLT), with additional features like smart contracts, can speed up payment processing, increase security and make audits more convenient.

Frederic Dalibard, head of Digital for Corporate & Investment Banking at Natixis, a bank that takes part in the system, said that: “Natixis believes in the potential of distributed ledger technology for cross-border payments and is exploring several initiatives in that space.”

R3, which leads a consortium of over 70 banks and financial services providers, will work with 22 of its member companies. Besides Natixis, the list includes BBVA, Barclays, Commerzbank, HSBC, CIBC, DNB, Intesa, KB Kookmin Bank, KBC, KEB Hana Bank, Shinhan Bank, US Bank, TD Bank, and Woori Bank.

The prototype of the project will be ready by the end of the year and will be based on Corda, which is R3’s blockchain platform. The blockchain developer recently updated Corda and released a new version.

R3 CEO David E. Rutter commented on the project, saying:

“International payments systems have struggled to keep pace with the explosion of global trade and the globalization of the world’s markets. This marks a significant milestone for distributed ledger technology as we work alongside our bank members to harness its unique attributes to build the world’s first true international payments system.”

He added that the blockchain infrastructure would transform payments:

“This solution will be a game-changer for any bank or company whose business relies on making or receiving cross-border payments, and is a key part of R3’s wider strategy to leverage distributed ledger technology for faster and more efficient execution of all types of financial transactions.”

Dalibard, from Natixis, said that his bank is confident about the system provided by R3, as it will be compatible with the upcoming digital currencies issued by central banks.

Commercial banks are largely positive about blockchain technology, but there are some detractors. German bank Berenberg said in a recent report that blockchain was an “overhyped technology” with few real uses against many pilot tests. On the other hand, UBS Wealth Management recently said that the contribution of this emerging technology could reach $400 billion of the annual global economic value by 2027.