International Business Machines Corp. (NYSE:IBM) recently unveiled a blockchain-based banking technology aimed at aiding financial institutions to simplify and quicken cross-border transactions.
The blockchain-based solution is intended to reduce payment settlement time, thereby lowering the expenses related to those payments. The idea is to find a single-network based almost real time payment system across the globe. IBM will be partnering with Stellar.org and KlickEx Group for the development of the project.
Banco Bilbao Vizcaya Argentaria, Bank Danamon Indonesia, Bank Mandiri, Bank Negara Indonesia, Bank Permata, Bank Rakyat Indonesia, Kasikornbank Thailand, Mizuho Financial Group, National Australia Bank, Rizal Commercial Banking Corp. (RCBC) Philippines, Sumitomo Mitsui Financial Group, TD Bank, Wizdraw (HK) of WorldCom Finance, and other financial institutions have already agreed to the implementation of the technology.
Notably, live transactions in 12 currency systems across the Pacific Islands and Australia, New Zealand and the United Kingdom are already in process through this solution.
Importance of Blockchain
Blockchain, which is based on distributed ledger technology (DLT), ensures secured data storage and transmission. Owing to the decentralized nature of the database, every member involved in the consortium using the data can see the changes made, which further enhances its security.
The technology also puts a check on hacking and double counting, thereby decreasing the possibilities of monetary losses via cybercrime. With increasing instances of cybercrime, which per a recent report by Juniper Research is expected to cost global businesses over $8 trillion in the next five years, this secured ledger-based technology is bound to gain further importance.
We note that blockchain, which primarily dealt with cryptocurrency based transactions, is gaining wide acceptance in multiple industries. It is primarily being used for tracking transactions related to digital assets or documents, particularly in industries like banking, financial services and insurance.
Per data from MarketsandMarkets, blockchain technology is projected to reach $2.3 billion by 2021 from $210.2 million in 2016 at a CAGR of 61.5%.
Other Blockchain Initiatives of IBM
We believe IBM is well poised to grab the projected growth opportunity of the blockchain industry with its widespread presence in the relevant market.
Notably, IBM has been working closely with Swiss banking giant UBS UBS since 2016 on a blockchain-based trade finance platform called Batavia intended to ease the process of goods transportation via land, air or sea.
Recently, Bank of Montreal, CaixaBank, Commerzbank and Erste Group also joined the initiative.
The company is also involved in a project with UBS called “Utility Settlement Coin” that targets development of a new form of digital cash to process faster security transactions. Deutsche Bank, Santander and BNY Mellon were already a part of the initiative, which was announced last August.
Most recently, six other financial institutions – Barclays, HSBC HSBC, State Street, Credit Suisse, MUFG and the Canadian Imperial Bank of Commerce – joined the consortium.
We believe that all these initiatives have helped the company become a leader in the blockchain sector, leaving its peer Microsoft Corporation (NASDAQ:MSFT) behind.
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