Thirty-two banks in Italy have gone live with one of the first real-world deployments of enterprise blockchain technology in interbank financial markets.
The Spunta Banca DLT app for interbank reconciliation has been built by the Italian Banking Association (ABI) on R3’s Corda Enterprise platform. “This heralds one of the most significant real-world digital transformations in the interbank financial services sector to date,” says David Rutter, CEO of R3. “Connecting such a large and diverse group of banks in a live environment is a major milestone for Corda, providing a glimpse into a brighter, more efficient and interconnected future for financial markets.”
The traditional reconciliation process for interbank transactions in Italy—formerly governed by the Spunta process is notoriously complex. Spunta Banca DLT uses a permissioned ledger to quickly identify mismatched transactions and enables the development of standard processes and communications with the net effect is enhanced transparency.
Each pair of banks communicate and share information with each other privately. The only data that exists on a bank’s node involves transactions to which the bank is a party. Automatic feedback is provided on the transactions to each party. The solution automates the reconciliation process and enables banks to pinpoint mismatches in interbank transactions quickly by sharing common data in a secure way and resolves mismatches in transactions that are normally a labour-intensive process, hampered by a lack of standardisation, fragmented communication and no “single version of the truth.”
The new application completed final testing at the end of 2019 and is now in production, with adoption from the entire Italian banking sector expected by the end of 2020. The solution enables banks to pinpoint mismatches in interbank transactions quickly by sharing common data in a secure way; performing checks and exchanges directly within the application and using standardised processes and communications for correcting issues.
The solution’s smart contract technology also provides banks with automated feedback on their transactions, leading to results that include lower operational risk and faster, more transparent reconciliation.
“Corda was perfect for the Spunta process for many technical reasons,” explains Silvia Attanasio, head of innovation at ABI. “The first benefit was that the banks gained full visibility of all the information about the accounts, both ‘nostro’ and ‘vostro’, via a dashboard. Traditionally, getting this information has required as many phone calls as the number of involved parties, and waiting for the answer from each one.”
The next stage of the project will see the creation of a working group of European banks to extend the application to a European level. This will involve working other European countries to define the requirements created by the characteristics of the ‘nostro’ and ‘vostro’ account process.