Payment and Settlement 2.0
This month, HSBC tested its own blockchain-inspired system to settle three million foreign exchange (FX) transactions worth up to $250 billion, according to claims.
The recent innovations with blockchain/distributed ledger technology (DLT) highlight that financial institutions are acknowledging the need for greater capabilities in the world of finance, similar to how information is now managed and exchanged compared to twenty years ago.
HSBC’s new platform, “FX Everywhere,” utilizes DLT to conduct thousands of cross-border transactions internally within the bank using a shared ledger, with the aims of creating greater efficiencies and automating daily operations.
“Following successful implementation inside the bank, we are now exploring how this technology could help multinational clients – who also have multiple treasury centres and cross-border supply chains – better manage foreign exchange flows within their organisations.” – Source: Finextra
Making Cross-Border Payments Easier Than Email
Sending currency across the globe using “traditional methods” (wire transfer) still takes several days and carries a heavy fee. We now live in an age where information is sent within seconds, and cryptocurrencies provide a glimpse into how easily it should be to send and receive value.
The financial system still uses an outdated system from the seventies, while companies such as Ripple are hot on the heels of SWIFT, who are well established but much slower and more expensive to transact with.
While HSBC is solving these limitations internally, there are others alongside the megabank that are solving the limitations externally, connecting institutions together to create a global system for exchanging value.
Financial institutions are now waiting on clearer regulatory clarity with digital assets and blockchain-inspired technology. In this time, use cases are being explored with the technology and institutions will likely innovate accordingly alongside many of the surviving cryptocurrencies and blockchain projects.
This is not investment advice; please always do thorough research and only invest what you are willing to lose, especially in times of uncertainty.