The importance of the news that IBM announced on Monday, is that consumers and merchants will now be able to send money in a different country within minimum time, stimulating a payments process that normally used to take days.
Under the latest blockchain system, banks will make the transactions using digital currency Lumens and then depend on the local market makers for the conversation of Lumens into local fiat currency.
IBM said it would continue expanding the capabilities of the network with the eventual aim of supporting "central bank-issued digital currencies, securities, bonds and structured financial assets".
"It is created to augment financial flows worldwide, for all payment types and values, and allows financial institutions to choose the settlement network of their choice for the exchange of central bank-issued digital assets". The technology is also expected to increase financial inclusion among individuals with restricted access to financial services in developing countries and could speed up the cross-border payments and transactions which now take up to several days to clear.
Within a period of one year, it is expected to hand over 60% of all cross-border payments from the retail industry in the South Pacific and plans to go far beyond just that.
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The system is operated on the Blockchain Platform of IBM that itself is on the Hyperledger Fabric open source that powers Blockchain as a service that was announced in early 2017. The companies are attacking the problem of worldwide payments, which can be costly, laborious, and error-prone.
Currently, worldwide transactions take days, if not weeks, to be completed.
National Australia Bank, TD Bank, and other financial institutions are lending their support, by collaborating and advising in the system's development with the intent to help expand its use in other regions around the world, says IBM.
IBM gave the example of a Samoan famer entering into a trade contract with an Indonesia-based buyer. The blockchain could be used to record the terms of the contract, manage trade documentation, allow the farmer to put up collateral, secure letters of credit, and finalize transaction terms with immediate payment, thereby conducting global trade with transparency and ease. With KlickEx Group and Stellar.org, IBM is providing a breakthrough for payments technology and has started using digital currency to move money across the South Pacific.