The group of 14 Italian banks that began work on a blockchain has successfully passed the first phase of technical procedural verification.
Following this pilot phase, work is now being done on a substantive test of the processes in the field.
Two months of real data were uploaded to the 14-node infrastructure, that corresponds to the 14 banks that are working on the interbank Spunta Project. A total of 1,200,000 movements were uploaded. The performances obtained are good, thus making it possible to continue to the next phase of testing. This new test will involve participating banks working on a daily basis with the new application based on distributed databases.
The project, which is being carried out by Abi Lab, the banking research and innovation centre promoted by the Italian Banking Association, seeks to implement the blockchain to interbank processes. The objective is to provide data transparency and visibility, faster transaction execution and the possibility of performing checks and exchanges directly within the application.
With the blockchain, data is not stored on a single computer but is distributed over several nodes, i.e., on several machines that are interconnected. In this way, a vast database can be distributed, and transaction management is shared between several nodes on a network. Without having to rely on a single centralised entity, this new concept of distributed databases, Distributed Ledger Technology (DLT), changes the way we think and design the relationships and the exchange of value between the participants.
The scope of application of this project is interbank reconciliation, which verifies the matching of correspondent accounts that involve two different banks, that contain transactions executed between two customers of two banks. The application of DLT technology can improve certain specific aspects of current operations that can result in discrepancies that are difficult for the banks to manage. Among these is the time needed to identify transactions between banks that do not match; the standardisation of the process and the single communications protocol; the visibility of the transactions between parties. Smart Contracts are another innovation in this area: a software programme that incorporates the rules of execution of an agreement to control the transfer of data and information.
The project is, therefore, entering an even more advanced operational phase in which DLT database concepts are applied to an interbank process. The banks are pioneers in this new area. The work group, composed of the participating banks and ABI Lab, has selected “Corda” DLT platform developed by R3, and in collaboration with Ntt Data for development of the application and Sia as provider of the node infrastructure, has defined the new verification process. The work is based on the Enterprise version of the platform which was released last June with modifications and enhancements developed specifically for the Spunta project. The new process will, while respecting the confidentiality of the information, make bilateral channels available through which each counterparty can exchange information. Through the use of the DLT platform and the implementation of Smart Contract, it will be possible to provide automatic feedback on bank transactions, thus simplifying and accelerating the reconciliation process.