Blockchain company R3 has announced that it is entering into a strategical partnership with a correlative firm Axoni, as well as 7 other banking institutions, including Credit Suisse, AB (Alliance Bernstein) and HSBC.
The New York company stated that it, and its new partners, will be jointly working on creating efficient blockchain-based automate data handling systems. The partners, as the company explained, will be working through the Securities Industry and Financial Markets Association (SIFMA) to create a proof of concept in the coming months.
The participants believe that a major part of the reference data, which constitutes 40%-70% of all the finance transactions, can be automated using the blockchain technology. Once the records are consolidated on a single immutable ledger, companies won’t be required to individually maintain huge amounts of reference data. It will create a single window for all institutions to access the required transaction information whenever required from a master copy on the blockchain.
Consolidation of all reference data including information about the specification of financial products, issuer details, counterparty information, currencies, corporate actions and prices on blockchain will have to be in accordance with the existing and upcoming regulations like the Dodd-Frank Act and EMIR.
In the press statement, R3’s CEO David Rutter states,
“Quality of data has become a crucial issue for financial institutions in today’s markets. Unfortunately, their middle and back offices rely on legacy systems and processes – often manual – to manage and repair unclear, inaccurate reference data. Distributed ledger technology – which allows financial institutions to push these functions to a cloud environment – removes the need to reconcile multiple copies of data, providing a sophisticated and agile solution to the headaches currently caused by these legacy systems and processes.”
The new initiative follows the completion of an earlier blockchain based prototype, developed by the same team to improve risk management and reduce cost efficiency issues inherent in managing financial reference data. The existing prototype and upcoming proof of concept product are expected to be cross compatible, offering a seamless solution to manage reference data in financial institutions.
Many studies have already proven that blockchain technology is the most economical option for the mainstream financial sector. By implementing it, the global banking sector can potentially save as much as $20 billion annually. We can soon expect more innovations in the sector, followed by a gradual shift from legacy systems to distribute ledger based systems.
Ref: R3 Press Release | Image: R3CEV