Central banking giant JPMorgan Chase plans to expand its blockchain network to include interbank settlements, in an effort to ward off competing services like TransferWise and Ripple. Formed in 2017 through collaboration between the Royal Bank of Canada and Australia’s ANZ Bank, the Interbank Information Network (IIN) utilizes the Ethereum-based Quorum blockchain to solve compliance and settlement speed issues.
According to John Hunter, head of Global Clearing at JPMorgan Chase, the bank aims to broaden its remittance capabilities, and the IIN is “looking at the ability to do more at the point of settlement.” Among the updates to be expected with the IIN is real time counterpart account verification for transactions.
Currently, any errors in a recipient’s account number, sort code or other details can result in the payment being rejected days after it was sent. Hunter says that about 5-20 percent of payments suffer this error, which is “where we’re trying to alleviate some of that pain,” he said.
According to the Financial Times, the settlement system will be up and running by Q3 of 2019, facilitating both domestic an international payments. JPM is also testing a sandbox for fintech companies to leverage the IIN and develop applications with its features.
As mainstream blockchain adoption expands, more banks and financial institutions find themselves compelled to make a choice: protect their interests, or embrace the technology for success. JPMorgan Chase is continuing to play both sides of the blockchain field, with recent plays such as the announcement of its own native digital asset, JPM Coin.
Since blockchain tech has poised itself to disrupt the legacy banking industry, there has been an arms race between tech startups and banks to determine who will control the market.
At present, it’s too soon to tell exactly how influential a JPM-backed blockchain endeavor could be. While some consider a bank-developed blockchain to be the death of any competing services, others question the decentralization, privacy and trust associated with using a centralized digital currency.
It’s also worth considering the likelihood of powerful banks deferring to solutions on another bank’s blockchain, compared to the likelihood of them agreeing to use a bank-agnostic chain.
Nonetheless, some blockchain-centered startups have secured strong first-mover advantages over those now trying to implement DLT’s, so it could be challenging for even the most powerful and well connected banks to bridge the technology gap.