ANZ the latest Big Four bank to test blockchain across borders

Elizabeth Barry 11 October 2016

australian bank anz

ANZ and US Bank Wells Fargo have built a distributed ledger platform for correspondent banking.

ANZ is the last of the Big Four banks to start testing blockchain as part of a partnership or network. In a joint effort with US Bank Wells Fargo, ANZ has built a shared distributed ledger platform to test correspondent banking, which involves cross-border payment reconciliation and settlement.

Blockchain, which is a type of distributed ledger technology that records, encrypts and transfers data in a linear chain, has progressed from theory to prototyping quickly. This is especially true for banks that want to use the technology to innovate their product and processes.

CommBank, NAB and Westpac have all engaged in global blockchain networks and blockchain tests. CommBank successful completed two distributed ledger prototypes as part of a network of 15 global financial institutions, while NAB has joined Westpac in a global network to use distributed financial technology for payment transfers.

While it's usual for banks to develop correspondent relationships with foreign banks, which can involve each bank carrying out wire transfers, transactions, deposits or other types of payments on behalf of the other, there are inherent problems in the system. Facilitated by industry-owned body Swift since the 1970s, the process relies on each bank dealing in its local currency. This results in two separate account statements held by each bank that need to be maintained and reconciled.

We were determined to avoid the hype often associated with emerging technologies and focus our efforts on addressing a real pain point

This distributed ledger prototype developed by ANZ and Wells Fargo aims to increase transparency and reduce the need for reconciliations when banks carry out cross-border transactions.

Nigel Dobson, general manager wholesale digital and transformation projects at ANZ, said the aim of the prototype was to deliver real value.

“We were determined to avoid the hype often associated with emerging technologies and focus our efforts on addressing a real pain point for both financial institutions and customers. The success of our proof of concept highlights what can be achieved when technology and business innovation are combined with cross-industry collaboration,” he said.

The two banks developed the prototype "within a short space of time" and claim it can work in parallel with existing infrastructure.

"While this joint initiative has advanced our collective thinking on innovations in this space, the networked nature of both this problem and the proposed DLT solution means the full benefits will only be realised through broad industry participation and adoption," he says.

While still only a proof-of-concept, the joint venture by ANZ and Wells Fargo shows the potential for innovation in bank product and processing using distributed ledger technology.

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