The increasingly popular blockchain technology could soon be harnessed to make inter-bank payments more efficient.
Three new software prototypes for such payments have been developed by a consortium led by the Monetary Authority of Singapore (MAS) and The Association of Banks in Singapore (ABS). It includes financial institutions such as Bank of America Merrill Lynch and the three local banks.
A blockchain is a type of digital ledger using encryption to limit tampering.
The new models are among "the first in the world to implement decentralised netting of payments in a manner that preserves transactional privacy", according to a statement from MAS and ABS yesterday. Netting refers to consolidating several payments or transactions with the aim of reducing transactions.
MAS and ABS noted that existing programmes used in inter-bank payments rely on a single payment queue, among other details. "Decentralising the queue, however, potentially exposes payment details to an unauthorised party", said the statement, but the new models are able to maintain privacy.
Consultancy Accenture, which was appointed to manage and develop the prototypes, will publish a report with more findings during the Singapore FinTech Festival, to be held from Nov 13 to 17.
ABS director Ong-Ang Ai Boon said: "We are encouraged that this outcome could potentially be leveraged on by the banks to catalyse the development of more innovative solutions."
MAS chief fintech officer Sopnendu Mohanty noted that protecting the privacy of transactions, while offering the ability to perform netting, opens up the opportunity "for a wider adoption" of settlement systems that use distributed ledger technology.