Real Time Payment Data
The blockchain network of JPMorgan, called Interbank Information Network (IIN), is a system that is used to share payment information among partner banks. The speed and efficiency, including low cost of operations is already turning out to be much better than traditional methods, with more than 220 banks using IIN globally.
The new feature in, according to JPM’s global clearing head John Hunter, is instantaneous validity of a bank account to which a payment is being made. It means that any transaction being made will immediately verify that the recipient account exists or not. Normally, payments are held or reversed due to data error and that process can take days. Hunter said, “Banks straight through processing rates are in the mid-80s to mid-90s. It’s that gap — the 5 to 20 percent of payments — that have to be assessed by operations where we’re trying to alleviate some of that pain.”
IIN, launched back in 2017 as a pilot, is powered by Quorum. The main aim of the network was to deal with a number of issues that traditional banking faced, “from minimizing friction in the cross-border payments process to enabling payments to reach beneficiaries faster and with fewer steps.”
Today, with 220 banks that use the IIN for cross border payments, it stands as a direct competitor to the Ripple network. Both systems have nearly an equal amount of banks and stand as alternatives to the famous SWIFT network.
Although the SWIFT network is well established, with virtually every bank connected, IIN and Ripple are fast gathering numbers and at this pace, it will be only a few years before SWIFT is rendered obsolete. However, JPM is not touting the IIN as a cross border payment system. Rather, it says the network is designed to take advantage of blockchain where traditional systems cause undue delay. Sunghmahn Seo, the head of Europe, Africa and Middle East payments and ForEx at JPM says that the bank receives, on an average, 100,000 to 200,000 complaints regarding stuck transactions every year and each issue can take a significant time to clear, “There can be many steps between multiple correspondent banks in sending a payment from the US to China, for example. And when a query pops up, the question becomes: which bank has the full and complete information? Banks start sending emails but some banks don’t like to respond that way because email may be insecure. So, then it’s phone calls between banks in very different time zones. The query can start ping-ponging around. When it gets painful, it gets really painful. A payment that should have taken minutes can take many days to complete as requests for information ping-pong between the banks.”
JPM has not always been a fan of blockchain. Indeed, its other venture in decentralized systems, the JP Coin was a disaster, but its change of heartand the high number of banks joining the IIN shows that the bank is stepping in the right direction.