The recent completion of SWIFT’s ground-breaking proof of concept (PoC), which tested the application and potential of distributed ledger technology (DLT) for nostro reconcilitation, has given the 34 financial institutions involved, amongst them being Deutsche Bank, much to consider. The blockchain technology was tested in a sandbox environment throughout 2017 and proved it can, as expected, help to deliver real-time liquidity monitoring and reconciliation. This said, the effective application of the technology is largely dependent on, and thus limited by, a bank’s existing system infrastructure and business models.
Reflecting on the results of the PoC in discussion with Banking Technology, Andreas Hauser, Senior Business Product Manager for Intraday Liquidity Management, Cash Management, Deutsche Bank, assesses that “DLT shows promise [but] unanswered questions remain”, particularly regarding the “considerable prerequisites” involved in adopting the program.
Hauser also points out that “what really drives value for nostro real-time liquidity monitoring and reconciliation isn’t the blockchain technology itself”: similar results could be achieved by connecting the pre-existing systems of the provider and user via APIs. Hauser concludes that “the clearest benefits are expected for financial institutions – typically medium-sized, regional banks of investment firms – with a higher dependency on nostro services”.
Read the full article at Banking Technology here.