IBM’s cross-border payments solution will facilitate instant clearing and settlement of all transactions using Stellar’s blockchain network.
Tech giant IBM is actively working on several enterprises and retail solutions in the blockchain space. The tech titan has announced the launch of Blockchain World Wire – a cross-border payment system – powered by the Stellar blockchain network. IBM claims that its new payment system outclasses traditional payment systems concerning payment speed, transactions costs, efficiency, etc. The system also supports payments across multiple asset types, of any size, and to any global destination.
Working of Blockchain World Wire Payments System
IBM claims that the Blockchain World Wire “can simultaneously clear and settle cross-border payments in near real-time.” In the official announcement, IBM also explains the modus operandi of its products. The World Wire payment’s product works by replacing the banking intermediaries required to make cross-border payments using digital assets over a distributed ledger network.
In the official announcement, IBM explains this by writing:
“Two financial institutions transacting together agree to use a stable coin, central bank digital currency or other digital assets as the bridge asset between any two fiat currencies. The digital asset facilitates the trade and supplies important settlement instructions.” It further adds: “It all means funds can now be transferred at a fraction of the cost and time of traditional correspondent banking.”
The process involves integrating the World Wire APIs into the banks existing payments system. In a cross-border payment, Bank A will initially convert the fiat into a digital asset before sending it to Bank B. Bank B will then covert the digital assets into the respective fiat of the associated country. IBM notes that “All transaction details are recorded onto an immutable blockchain for clearing.”
As reported by FinExtra, IBM will demo this product at the Sibos Banking Conference in October this year.
IBM-Stronghold Partnership for a Stablecoin Project
In July, IBM partnered with cryptocurrency startup Stronghold to work on a new USD-pegged stablecoin project. The Stellar blockchain network powers the Stronghold stablecoin. IBM head of Blockchain Solutions, Financial Services, Jesse Lund then said that the idea behind the launch of stablecoin is to operate within the regulatory ambit while simultaneously deriving the benefits behind the cryptocurrency. Lund said:
“IBM will explore use cases with business networks that we have developed, as a user of the token. We see this as a way of bringing financial settlement into the transactional business network that we have been building.”
IBM’s partnership with Stellar will give a big boost to the Stellar Lumens (XLM) cryptocurrency. This partnership has created a lot of excitement within the Stellar community. Although IBM has not stated it explicitly, the company is expected to use XLM tokens for digital asset transfer.
Stellar is strongly emerging as a formidable competitor to Ripple in the cross-border payments solutions. However, Ripple has got a far greater outreach among global financial institutions through its xCurrent and xVia products. The company is yet to find success with its xRapid solution which uses XRP tokens for cross-border settlements.