Global interbank messaging organization SWIFT said Thursday it is launching of a Proof of Concept (PoC) to explore whether distributed ledger technology (DLT) can be used by banks to improve the reconciliation of their nostro databases in real time, optimizing their global liquidity.

This PoC will test whether distributed ledgers may be able to help banks reconcile nostro accounts more efficiently and in real time, lowering costs and operational risk.

Under the current correspondent banking model, banks need to monitor the funds in their overseas accounts via debit and credit updates and end-of-day statements. The maintenance and operational work involved represents a significant portion of the cost of making cross-border payments.

“Whilst existing DLTs are not currently mature enough for cross-border payments, this technology, bolstered by some additional features from SWIFT, may be interesting for the associated account reconciliation,” said Wim Raymaekers, Head of Banking Market and SWIFT gpi at SWIFT. “This PoC gives us the opportunity to test DLT and determine if it can be applied to this particular use case.”

SWIFT will deploy open-source Hyperledger technology, and combine it with key SWIFT assets to bring it in line with the financial industry’s requirements. Using a private blockchain in a closed user group environment, with specific user profiles and strong data controls, user privileges and data access will be strictly governed.