MUFG Bank and Banco Bradesco will use distributed ledger technology from Ripple, a San Francisco-based software vendor specializing in global real-time settlements, to create a new cross-border payment service between Japan and Brazil.
A recently-signed memorandum of understanding between Tokyo-based MUFG and São Paulo-based Bradesco extended an existing 2017 collaboration agreement, although the relationship between the two banks dates back to 1973, when an MUFG predecessor bank invested in the Brazilian financial institution.
The new payment system, according to a press release from MUFG, “will assist the banks as they work toward commercializing a high-speed, transparent and traceable cross-border payments solution.” MUFG is owner of Union Bank, which has a mainly West-Coast-based footprint.
According to the release, MUFG provides specialized services in Brazil, and across Latin America, for corporates in metals and mining, oil and gas, food and beverage, power and utilities, agriculture, and financial services. The bank also offers local cross-currency bonds and loans, trade finance, foreign-exchange and derivatives, structured finance, project finance, syndicated loans, and transaction banking.
MUFG in 2017 had announced it would join a group of leading transaction banks — responsible for building, maintaining and enhancing rules that ensure operational consistency and legal clarity for every transaction — to support Ripple’s global payments network. According to Ripple’s website, this group also includes Bank of America Merrill Lynch, RBC, Santander, Standard Chartered and Westpac.
Ripple, backed by a host of venture capital firms and banks alike, was established in 2012. The company’s cross-border payment software, RippleNet, uses Interledger Protocol, an internet protocol which provides pre- and post-settlement messaging function, and allows for the real-time settlement and delivery of funds.
MUFG’s agreement with Bradesco to use Ripple isn’t the Tokyo giant’s only foray into blockchain.
BBVA Syndicates Loans on the Blockchain
Spain-based BBVA recently announced it signed the world’s first blockchain-based syndicated loan arrangement with grid operator Red Electrica, with France-based BNP Paribas and MUFG as co-lenders on the $150 million deal.
According to BBVA, blockchain can speed up the syndicated loan process from about two weeks to 24-to-48 hours, while loan signing and document processing, which usually takes hours, can now be completed within minutes.
It’s also worth noting BBVA completed its first cross-border payments using Ripple’s system in 2017. The bank transferred numerous Euro-denominated payments to Mexico from Spain in a matter of seconds, rather than the four days it would normally take to clear.
A report by advisory firm Greenwich Associates released earlier this year indicates we can expect more blockchain products from large financial institutions in the near future.
According to the report, Blockchain Adoption in Capital Markets—2018, the industry is spending about $1.7 billion a year on blockchain, as banks and other financial firms move beyond the proof-of-concept stage and start rolling out commercial products making use of distributed ledger technology.
The study, which entailed over 200 interviews with market participants, found blockchain budgets had increased 67% in 2017, with one in 10 of the banks and other companies reporting blockchain budgets in excess of $10 million. Over the same period, headcount dedicated to blockchain initiatives doubled.
While half the executives interviewed said implementing the technology was harder than expected, more than three-quarters of the projects currently under development were expected to go live within two years.Like This Post