Banks send each other $500 million on blockchain launch day

Banks send each other $500 million on blockchain launch day

As small business and corporate clients increasingly demand real-time payments, in order to ensure settlement and efficient use of working capital, Sam Sidhu wants to meet this need.

“We want to be at the forefront of this innovation, being a bank that is large enough to accept large corporate clients and take over customer service, but small enough to have the flexibility to do so,” said Seydoux, CEO of Bancorp Clients. in West Reading, Pennsylvania.

Sam Seydoux, CEO of Bancorp Clients (left), says commercial clients are increasingly requesting real-time payments, which is why the bank is using a distributed ledger developed by Tassat Group, led by CEO Kevin Greene.

Over the past weekend, clients of the $20 billion in assets and two other banks, the $1 billion Cogent Bank in Orlando, Florida, and the $66 billion Western Alliance Bank in Phoenix, began using an interbank network and a distributed ledger. To conduct transactions between each other.

They sent and received $500 million in transactions via the Interbank digital network on Saturday. There were about 400 deals with an average value of $1.25 million.

“This is a method that is not only capable of instant transfer, but also instant settlement, which means that the funds are already in the account instantly in addition to the instant data transfer,” Seydoux said. “This reduces a tremendous amount of complexity on the recipient end and creates certainty and certainty on the sender end. So it’s significantly more useful. If you don’t have the technical limitations, that’s how ACH banks were designed in the 1970s, when they moved from paper checks.”

These transactions are usually done using FedWire or ACH. Instead, it was conducted using a private licensed ledger developed by the Tassat Group. The blockchain developed by Tassat is a specially authorized fork of the Ethereum blockchain using ERC 20 smart contracts. Every bank has its own instance of a blockchain. The digital network between banks connects these blockchains to each other.

Using private networks like these “is probably the direction things are going with institutions,” said Alex Tapscott, managing director of the digital asset group at Ninepoint Partners and co-author of the book “Blockchain Revolution.” “There is a need for a lot of applications for applications that do these things, especially in financial services, where you may not want to rely on a shared ledger where everything is public.”

Participating banks transfer funds from direct deposit accounts to a universal account owned by the bank. Tassat then generates the corresponding amount of tokens and places them in the banks’ blockchain wallets. Tassat then transfers those private tokens based on the banks’ requests to anyone else on the platform. The receiving bank converts the tokens into dollars and deposits them into the customer’s account.

The sender of the money receives instant confirmation that it has been received on the other side. And at least in theory, these transactions take place in real time, even outside business hours, when banks and banking services are closed.

Tasat’s chief marketing officer, Amy Krett, said in an interview that the weekend launch was “a very, very big first step to show that the network is up and running and ready to go.” “The next step will be for banks using Tassat Pay to offer the network to their customers, as an opportunity for something they can use to make interbank payments.” It expects corporate customers to live in early 2023.

Later, perhaps in early 2023, the network will be opened to commercial customers who send and receive payments directly from their own accounts to and from counterparties at other participating banks.

The first customers to use this are likely to be digital asset companies It started late last yearSaidu said.

Customers plan to let customers use the network for free, at least initially.

For client clients, using this network can provide working capital efficiency and facilitate back-office accounting for settlement, Seydoux said.

For example, a commercial tenant can pay the landlord “at a time that is most convenient for you rather than several days or up to a week in advance to make sure the money is received on time,” Seydoux said. The network also reduces the risk of transaction failure due to the many data fields that must be entered in a traditional payment request.

“If I call your bank and say, ‘Can you send $1,000 to so-and-so?’ There are follow-up questions about the address and other data points, and if some of those things don’t match, it can either fail or be rolled back, because they don’t know how to reconcile that.”

In the future, the bank plans to introduce other use cases for the network beyond payments.

Crete said that during the development of the network, the Tassat group received advice from a working group of more than 50 banks.

“Our plan is by the end of the year to open this fully to all types of customers,” Kevin Green, CEO of Tassat Pay, said in an interview. “We are only implementing a private, licensed blockchain to enable banks to make real-time payments around the clock securely,” Green said. “The network allows them to do this through the banks. And we have a game plan to expand the network over time.”

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