State Bank of India has tied up with JPMorgan to use the US bank’s blockchain technology to speed up overseas transactions.

The State Bank of India (SBI) has joined JP Morgan’s Blockchain network to improve cross-border transactions for its customers, the Economic Times reported. The addition of the country’s largest bank to the global blockchain platform run by the global banking giant will mean lower costs for transactions and better speeds when it comes to settlements, the report said citing sources.

Called ‘Liink‘, the blockchain platform allows banks, financial institutions and corporates to transfer and settle data on a peer-2-peer basis. By using the platform, SBI and other banks can exchange information securely across widespread network of banks and institutions with relative ease and speed. At present, it has over 380 banks on board including SBI, ICICI Bank, Canara Bank, IndusInd Bank, Kotak Mahindra Bank, Federal Bank, Union Bank of India and Yes Bank.

Problems with sending money abroad

Whether supply-chain finance, trade finance or cross-border payments, banks are generally circumspect on sending money abroad on behalf of clients when they have very little data and tools to conduct due diligence on the recipient or sender of funds. In supply-chain finance, a bank or other lenders provide liquidity to a large manufacturing corporate, for example, when they place an order with vendors. Similarly, in trade finance, a bank or lender provides financing for international trade, whether for exports or imports. Both products aim to meet the financing gap between buyers and sellers. But historically, supply-chain and trade finance has long suffered from an information asymmetry problem. As a result, it becoming increasingly hard for importers and exporters to make cross-border payments or receive trade finance to fulfil their purchase orders.

Enter blockchain

This is where blockchain solutions such as Liink come in. The system allows banks to communicate with counter-parties with regards to Know-Your-Customer (KYC) documentation, identity and business validation, as well as due diligence reports among other use cases. Liink also allows pre-validation of account information even before making payments, which can help in fraud and risk mitigation.

Liink is based on the Ethereum network and was piloted in 2017. It was primarily built for in-house use particularly in improving cross-border payment processes. In October last year, it launched JPCoin, the first crypto-token developed by a bank, to be used for quicker cross-border payments.

But unlike other blockchain projects tackling cross-border payments and data flows like R3’s Corda or Quorum, Liink is not open-source although JP Morgan has been inviting fintechs and other developers to join the platform and build applications on top of it. According to Christine Moy, head of Liink, the platform is meant to complement the Society for Worldwide Interbank Financial Telecommunication (SWIFT) system and not replace it.

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