IBM Blockchain World Wire is a New Global Payment Network launching in more than 50 Countries

Sending money across the border is quite a chore with a series of intermediaries required for clearing and settlement. This adds time and cost to the whole process. Moreover, the method also lacks transparency, which may also lead to disruption. With IBM Blockchain World Wire, the clearing and settlement happen in real time.

IBM is finally making way for different banks and financial institutions to join the blockchain revolution. This means that rather than going through a series of intermediaries for sending money across borders, IBM has created a real-time global payment network that can support cross border transactions. This also includes foreign exchange and is available in more than fifty countries, using cryptocurrencies (digital assets) known as ‘stable coins.’

Stellar Blockchain as a host

This system uses the stellar protocol to serve as a network provider for international payments and to enable point to point money transfers to deal with the complexities of conventional correspondent banking. The world wire system is direct competition to the cryptocurrency Ripple XRP ledger. Ripple also aims to reduce or eliminate the banking intermediaries who add complexities and additional cost to the traditional system of making international payments.

How does the IBM Blockchain World Wire work?

World Wire was launched officially on 18th March 2019 and is currently available in 72 countries and 44 currencies all over the world. It is the first blockchain platform which allows the process of payment messaging, clearing and settlement of transactions on a single platform. The funds have a USD backed stable coin and are settled in stellar lumens.

In order to use the system of IBM Blockchain World Wire, two financial institutions have to agree to a single currency, any digital currency or a stablecoin that can be used as a bridge asset between any two fiat currencies. These two financial institutions will then use the World Wire APIs which are plugged into the banking system of both banks. They would have to first exchange the fiat currency into the digital asset at Bank A and then it is transmitted to Bank B, where it is converted into the second fiat currency. All details related to the transaction are recorded in the immutable blockchain for clearing.

Which banks are on board?

As per the reports on Coindesk, around 6 international banks have already signed letters of intent for issuing stablecoins or tokens which are backed by fiat currency. So far three names of different banks have been made public which includes, RCBC that is based in the Philippines, Banco Bradesco of Brazil, and South Korea’s Bank Busan. The three remaining banks will offer digital versions of Indonesian rupiah and the Euro and are pending regulatory approvals and other reviews.

Why Stellar?

Many people may wonder why Stellar was chosen for this project. As per Jesse Lund, who is the Head of IBM’s Blockchain, it was because it is scalable, transparent and offers a range of assets which can be traded on their platform. It does have some issues with liquidity, but IBM truly believes that this project can do wonders for the international banking industry as they adopt cryptocurrency. As digital assets and cryptocurrencies become popular with the financial institutions, it may even prompt other people to buy and invest in these digital assets. Stellar aims to have an open financial system which can provide people of all income levels access to cheap financial services. The services which are included are:

  • Remittances
  • Micropayments
  • Mobile branches
  • Mobile money

In addition to this, another powerful and important feature of Stellar network is their Distributed Exchange. This is where users can exchange or liquidate their funds for other digital currencies or fiat currencies, using the exchange anchors from this platform.

What does it mean for XLM token?

This new project is an excellent boost for the cryptocurrency industry, yet the market hasn’t shown too much interest for the XLM tokens as this has been reflected in the XLM price, which has stayed in line with the rest of the market. IBM, however, will still be the main driving force behind the XLM, providing it stable future outlook. Even though the price did not increase very much, the future is positive with growth potential.

What this means for consumers?

One of the reasons why many regulated financial institutions and banks have shown interest in joining the IBM World Wire network is due to its benefits. International money transfers, also known as remittances are a significant part of the global economy. As per the research of the World Bank, the migrants all over the world sent about $574 billion to their family or relatives in their home countries in 2016. The USA is currently the largest source of international remittances in the world, sending a total of about $56.3 billion in 2015. The remittances which have been sent by the USA have been consistently climbing for the past century, except for the 2008 financial crisis. Sending money globally, across the border, however, requires intermediaries for both settlements and clearing. This adds extra time and cost to the entire process and slows it down. IBM World Wire, on the other hand, changes the payment landscape in the following ways:

·      Faster payment processing

It allows simultaneous processing of the clearing and settlement. It also helps to reduce the time to dispute resolution and reconciliation. It also means there is no need for multiple people to process a single transaction, leading to quick results.

·      Lower costs

Having a payment processor like this means there is a less capital requirement for cross border transactions and also lower clearing costs. Moreover, it also results in a reduced cost and time to connect new markets to capital flows.

·     Increase in efficiency

This process leads to efficiency as there is one exchange free which is between all currencies and it has an end-to-end transparency.

·      Simple process

The whole process is quite simple and provides a configuration ready solution that can be easily integrated with any system. It can also support payments of different sizes for different destinations globally and in different asset types.

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