A group of 14 Italian banks has started the operational experimentation of a blockchain. After an initial test phase, the experiment will be extended to other institutes. Here is the list of companies involved for the moment: Banca Mediolanum, Banca Monte dei Paschi di Siena, Banca Sella, BNL – BNP Paribas Group, Banca Popolare di Sondrio, Banco BPM, CheBanca! – Mediobanca Group, Credito Emiliano, Crédit Agricole, Credito Valtellinese, Iccrea Banca, Intesa Sanpaolo, Nexi Banca, Ubi.
The banks participating in the project are working together with Abi Lab, the technological laboratory promoted by the Italian Banking Association, to develop an application of the blockchain to interbank processes. The objective is to obtain the advantages deriving from the transparency and visibility of the information, from the greater speed of execution of the operations and from the possibility of carrying out checks and exchanges directly on the application.
The blockchain is a technology that allows the creation and management of a large distributed database for the management of transactions that can be shared between multiple nodes of a network. In other words, it is a database where data is not stored on just one computer but on multiple machines connected to each other, called nodes. Without relying on a single central subject, this new paradigm of distributed databases – the Distributed Ledger Technology (Dlt) – changes the way of thinking and designing the methods of relationship and the exchange of value between the participating actors.
The scope of application is the interbank check, which verifies the correspondence of the activities involving two different banks, for example transactions carried out between two customers of two institutions. In particular, the project verified how the application of DLT technologies helps to improve some specific aspects of the current operation, which can cause complex discrepancies for banks to manage. These include the time needed to identify mismatched transactions between two banks; the lack of a standardized process and a single communication protocol; the limited visibility of the transactions between the parties. Smart Contracts are also a further novelty in this panorama: they are software components that incorporate execution rules, which govern the transfer of value.
The project that applies the paradigm based on distributed Dlt databases to an interbank process is therefore entering its most advanced operational phase. Banks are pioneering new ground. The working group, made up of member banks and led by Abi Lab, selected "Corda" as the Dlt technology developed by R3 and, with the collaboration of Ntt Data for application development and Sia as node infrastructure supplier, defined a new tick process. The new process envisages having bilateral channels available through which the counterparties can reciprocally exchange information in compliance with confidentiality. Through the use of the Dlt platform and the implementation of Smart Contracts, it will also be possible to automatically match bank transactions, simplifying and accelerating the reconciliation process.
The pilot phase, which started in December, aims to form a basis for subsequent synergistic implementations of DLT technologies, extending their application to new and different areas and processes thanks to the greater knowledge of these innovative tools, undoubtedly favored by projects like this potentially involving the entire banking sector. All of this, which is an expression of fintech, is revolutionizing the banking world with experiments ranging from digital identity, to the management of calls for tenders, to donation platforms and international payments.
