The new project between these three companies is aimed at developing a cross-border blockchain-based payments solution which will give a boost to global transactions by increasing the transaction speeds and considerably reducing the transaction costs.
"Currently, cross-border payments tend to take up to several days to clear".
The blockchain has always been seen as a method to quicken (and cheapen) cross-borders payments, and now that movement - which includes a number of startups making moves privately - just got its highest profile advocate after IBM announced its own solution focus on banks. It will reportedly be processing up to 60% of all payments of cross-border in the retail foreign exchange corridors of South Pacific by next year.
IBM Blockchain enables direct payments between two parties in any currency participating on the network while maintaining security.
IBM added that each payment is permanent once recorded, with settlement instructions provided through smart contracts on the company's Hyperledger Fabric platform. The solution is meant to improve the speed in which banks both clear and settle payment transactions on a single network in near real time.
IBM recently announced this move on Monday through which the merchants and consumers can send money to another country in a real-time and it would certainly accelerate the payment process which usually takes days. IBM and Stellar both will work together to move money across the borders right through the South Pacific.
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That's the longer term objective but already the system is being used in 12 currency corridors between the Pacific Islands and Australia, New Zealand and the UK. It is being created to augment financial flows worldwide, for all payment types and values.
National Australia Bank, TD Bank, and other financial institutions are lending their support, by collaborating and advising in the system's development with the intent to help expand its use in other regions around the world, says IBM.
The report citing experts said the banks use of Stellar's digital currency is likely to be temporary as central banks will begin issuing digital currencies of their own, and that these become integral to blockchain-based money transfers.
For example, IBM said that in the future, its service could make it possible for a farmer in Samoa to enter into a trade contract with a buyer in Indonesia, while covering all aspects of their transaction, not just the payment.
IBM's VP of Blockchain, Jesse Lund told that it is an essential next step in the evolution of blockchain technology.