Fueling the financial industry with open source cross-border payments

Financial services, payments, streamlining inefficient processes is in our blood. So, it’s no surprise my colleague and contributor to this article, Nitin Gaur and his team, tackled the unthinkable four years ago by building a global payment network addressing remittance and interbank payments.

As if that wasn’t challenge enough, the team also designed it for the various regulatory and compliance requirements with robust payment operations, aiming to break all conventional mindsets to become more open and transparent.

The pandemic has forced many businesses and industries to reevaluate their strategies, customers, and teams. Our cross-border payment network, also known as IBM World Wire, was no different. We took a closer look at the landscape and strategic priorities of operationalizing a payment network and licensing. So, in late 2020, we shifted our focus from running a network to taking the learnings and applying it to our clients as service accelerators for our financial institution clients and payment providers.

With that, we are excited to announce that recently (after dealing with a lot of red tape), we have open-sourced the code behind IBM World Wire! We are committed to the open source community and accelerating our clients with what we have learned. You can find the code here (link resides outside ibm.com).

This is a cutting-edge network for cross-border payments, utilizing the Stellar-powered blockchain network. The core value of this network is to address the cost and friction in cross border payments.

As an alternative payment rail, it aims to reduce cost, remove friction, assert efficiency in settlement. Starting with money transfer operators (MTOs), this network aims to expand to other payment streams including B2B, banks and corporate payments.

We designed the original IBM World Wire to reduce the cost and friction in cross-border payment. We are happy to share it with the open source community. Here’s a look:

• Utilizes the Stellar network which uses Lumens as bridge currency — essentially a unit of value for transfer of value and transaction costs calculations
• All money transactions in the Stellar network (except lumens) occur in the form of credit issued by anchors, so anchors act as a bridge between existing currencies and the Stellar network
• Anchors are entities the network participants trust to hold their deposits and issue credits into the Stellar network for those deposits
• The credit issuance implies digital obligates which need to be settled out of band via traditional rails, for example. The idea is to provide a choice in the network for anchors to issue credits or stablecoin for instant settlement — addressing various business cases and cost points to the ecosystem and network operator.

This network is an application programming interface (API) payments product that is aimed to support the money transmission services of financial institutions. These software services use the blockchain network and the APIs. IBM serves as the network operator and hosts validator nodes. Transactions between participants are processed according to the consensus algorithm defined by the blockchain network.

As the network operator, IBM created network accounts in participants’ names and under participants’ control, including for the exchange of funds and value transfers. These accounts are designated solely for use in conjunction with IBM’s software services. Participants communicate with each other and exchange information, by way of the blockchain network, through their use of the network to transfer value between themselves.

Participants can settle transactions either directly between themselves off-network via a digital obligation, or on-network through the transfer of virtual currencies or other digital assets between their accounts by means of ledger entries maintained within the blockchain network.

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