The JPMorgan Interbank Information Network (IIN) is further building out its IIN network. The new IIN feature enables a bank about to send money to a correspondent bank to validate the receiving account exists. The existing IIN provides all banks in the money movement process a single place to document the transfer. The IIN does not settle the transaction. Now it validates the target account and then stores all ongoing communications between participating correspondent banks regarding that transaction in a common repository (the Blockchain ledger). Despite the claims made in the article IIN is not a direct competitor to SWIFT or Ripple:
“The new feature in, according to JPM’s global clearing head John Hunter, is instantaneous validity of a bank account to which a payment is being made. It means that any transaction being made will immediately verify that the recipient account exists or not. Normally, payments are held or reversed due to data error and that process can take days. Hunter said, “Banks straight through processing rates are in the mid-80s to mid-90s. It’s that gap — the 5 to 20 percent of payments — that have to be assessed by operations where we’re trying to alleviate some of that pain.”
IIN, launched back in 2017 as a pilot, is powered by Quorum. The main aim of the network was to deal with a number of issues that traditional banking faced, “from minimizing friction in the cross-border payments process to enabling payments to reach beneficiaries faster and with fewer steps.”
Today, with 220 banks that use the IIN for cross border payments, it stands as a direct competitor to the Ripple network. Both systems have nearly an equal amount of banks and stand as alternatives to the famous SWIFT network.”
Swift is a settlement network and it is likely many of the messages shared across IIN document payments made using Swift. IIN however tracks that payment as it is received by the correspondent bank and forwarded to the target bank through local settlement networks.
Banks can use Ripple in a fashion similar to IIN where Ripple only documents communications between correspondent banks, but the Ripple business model assumes banks will also settle using Ripple’s XRP crypto currency. So the question becomes this: Will JPMorgan connect JPM Coin to IIN to achieve a much closer equivalency to Ripple? As of today, JPM Coin is only a pilot and only used between corporate clients that are all banked with JPMorgan so as of today JPM Coin isn’t available to the 220 correspondent banks that use IIN.
It is also important to note that the new feature added to the IIN Blockchain can’t actually guarantee a specific account exists. Some gateway function needs to update the blockchain regarding account status. In Blockchain parlance this is called an Oracle. The account status is accomplished using an external gateway that connects the Blockchain to the system of record. If there is malicious intent, error, or failure of that gateway’s operation, then the validation of the account can be reported incorrectly.
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group
