IBM has put itself forward as a viable alternative to Swift and Ripple, launching a new cryptocurrency-powered solution for cross-border payments known as "World Wire".
IBM is paving the way for banks and other regulated financial institutions to join the blockchain revolution. Rather than going through a series of intermediaries when sending money across borders, IBM has created a real-time, global payments network to support cross-border transactions and foreign exchange in more than 50 countries.
The tech giant describes the solution as a “global payment network” that integrates payment messaging, clearing and settlement in one blockchain-based solution for foreign exchange, cross-border payments and remittances.
In essence, World Wire uses so-called “digital assets” to transfer money across borders: an institution pays in one fiat currency, which is then converted into a digital asset on the blockchain, then sent to the receiving end, where it is converted into fiat currency again.
Six international banks have already signed letters of intent to issue their own stable coins on World Wire, “pending regulatory approvals and other reviews”, IBM says. They will offer stable coins representing euro, Indonesian rupiah, Philippine peso, Korean won and Brazilian real.
The advantage of using blockchain-based digital assets over traditional methods is that it reduces intermediaries and brings down settlement times to seconds, IBM says. Today, banks rely on legacy correspondent banking systems like Swift, which can see cross-border transfers take days and incur high foreign exchange fees.
“This simplified approach improves operational efficiency and liquidity management, streamlining payment reconciliation and reducing overall transaction costs for financial institutions,” IBM notes. “World Wire provides a more straight-through model for cross-border payments using the Stellar protocol that makes money transfers point-to-point in lieu of the complexities of conventional correspondent banking.”
It remains to be seen whether banks will be just as cautious when it comes to using XLM as a settlement method on World Wire. Nonetheless about 97% of the world’s largest banks are already IBM clients – a fact IBM emphasises in advertising World Wire – which may well make the tech giant a more appealing option for financial institutions.