American multinational financial services corporation Visa is accelerating its exploration of blockchain technology for interbank payments. The company has invited a select group of European banks to participate in a proof-of-concept (PoC) that leverages blockchain to streamline domestic and cross-border fund transfers. The initiative is being run in partnership with digital payments startup BTL Group and its Interbit platform.
Visa’s Blockchain Vision for Interbank Transfers
Hendrik Kleinsmiede, co-founder of Visa’s innovation hub Visa Europe Collab, announced that the project is designed to “reduce the friction of domestic and cross-border transfers between banks.” By using blockchain, Visa aims to eliminate credit risk, cut operational costs, and accelerate settlement times. The PoC is expected to be completed within 100 days, according to the Financial Times.
Kleinsmiede stated: “We’re now inviting a small number of European banks to participate in the project alongside us and BTL. Participating banks will be able to connect to the network and send funds to other banks in the network across multiple currencies.” The network will run on BTL’s Interbit platform, a multi-industry blockchain solution built with compliance features designed to make smart contracts and other blockchain benefits accessible to financial institutions.
Smart Contracts Ensure Compliance and Security
A key feature of the project is the use of smart contracts to handle much of the regulatory and compliance requirements inherent in interbank transfers. This technology enables simultaneous cross-border settlements, reducing counterparty risk that has traditionally plagued such transactions. The arrangement ensures a level of fairness and security previously unattainable in interbank transfers.
Guy Halford-Thomson, founder of BTL Group, explained: “Through the use of smart contracts and blockchains, I believe we can create a fast, compliant and low-cost interbank payment and settlement service, with embedded regional compliance.” He also revealed that the collaboration between BTL and Visa began 18 months ago to adapt blockchain technology specifically for Visa’s interbank payment needs.
Industry Implications and Next Steps
If successful, Visa’s blockchain-based interbank system could revolutionize the traditional correspondent banking model. Currently, cross-border transfers often take days and rely on a chain of intermediaries, resulting in high costs and opacity. Blockchain offers the promise of near-real-time settlement with enhanced transparency. Visa’s move is seen as a significant endorsement of blockchain’s potential within mainstream finance.
The PoC will run for 100 days, and Visa expects to find banks willing to transfer funds using the distributed ledger by the end of that period. The specific banks participating have not been disclosed, but they are understood to be European institutions with an interest in blockchain experimentation. Analysts suggest that if Visa can demonstrate the feasibility and security of blockchain for interbank payments, it could prompt wider adoption across the financial industry.
Both Visa and BTL Group have declined to provide further details on the technical architecture or specific timelines beyond the 100-day window. Nonetheless, this initiative represents one of the first major trials of blockchain technology by a leading card network for core banking infrastructure.