Accenture, SAP and R3 are collaborating to co-innovate to build a real-time gross settlement (RTGS) system. The objective is to enable faster, more efficient, reliable and secure payments between banks and customers.
“Because the current payment settlement infrastructure is highly complex and fragmented, RTGS systems that leverage DLT and cryptographically secure tokenized payments can help central banks improve efficiency and security,” said John Velissarios, a managing director and global blockchain technology lead at Accenture.
“The RTGS prototype, designed in collaboration with SAP and R3, demonstrates the next stage of efficiency in payment systems and ultimately, paves the way to linking to tokenized-assets, like equities, to create an increasingly integrated and seamless financial services ecosystem.”
Real-time gross settlement
With real-time gross settlement (RTGS) systems, electronic funds transfers between banks occur in real time. They settle on a one-to-one basis. It is a process traditionally used for high-value transactions that require immediate clearing. Typically central banks handle these.
The new payment platform plans to allow for integration and interoperability between:
- distributed ledger technology (DLT) based solutions
- classic government-issued payments and settlements.
The co-innovated prototype design uses currency tokens to facilitate end-to-end settlement. The choice of currency tokens reflects a preference to digital currencies – because tokens they:
- serve as a proxy for standard central bank fiat currency (US$, Sterling, Euro, etc)
- use cryptography to increase security and authenticity.
The prototype provides, therefore, a flexibility essential to adopting and integrating new payment technologies while allowing banks to maintain their current payment formats.
“As market participants accelerate their use and acceptance of digital payments, payment providers and banks need to adapt quickly and prepare for these new forms of payments,” said Falk Rieker, global head of IBU Banking at SAP.
“The RTGS platform is designed to enable banks and payment providers to easily adopt and integrate DLT-based payments on their existing platforms, helping banks to safeguard as well as augment the value of their investments.”
The Accenture, SAP and R3 prototype
The prototype uses the SAP Payment Engine application. This serves as the central hub for:
- payment initiation
- processing
- clearing
It integrates with R3’s Corda (blockchain) platform to enable interactions with RTGS systems. This delivers ‘nearly’ seamless interoperability between conventional and token-based payments. Into this Corda environment, businesses could:
- transact directly
- possess privacy, by using smart contracts
- reduce transaction and record-keeping costs
- streamline operations.
Leveraging Accenture’s experience in central bank clearing and settlement, as well as blockchain capabilities, the prototype will enable peer-to-peer payments between banks that have adopted DLT as well as those that have not.
“As digital currencies gather momentum, the need for interoperability between conventional and token-based systems is key in meeting the promises of tokenization,” said Cathy Minter, chief revenue officer at R3.
“Corda was designed to execute transactions seamlessly from the outset, with the highest levels of certainty and security. Through our relationship with Accenture and SAP, R3 is collaborating with two of the tech industry’s major players to provide a real-time gross settlement token-based exchange. The end result is nearly instantaneous settlements, which will reduce friction throughout the transaction chain.”
Enterprise Times: what does this mean
Accenture collaborating with SAP (with its Payment Engine) and R3 (with its Corda platform) for a real-time gross settlement with a blockchain dimension is an intriguing idea. The integration of the Payment Engine and blockchain has its objective, of enabling more efficient, secure and reliable payments between banks and customers. This will have enterprise appeal – assuming the transactions costs are, at least, comparable with today.
What is less clear is what the central banks will think. It might please them to have a specific role removed. Equally they may fear an increasing opaqueness that could arise with large inter-enterprise payments handled outside central bank monitoring. Perhaps most intriguing of all is whether central banks might use some derivation for their own inter-central bank settlement systems.
