ABI Lab is building a blockchain proof of concept (PoC) to simplify and standardise domestic interbank reconciliation on enterprise software firm R3’s Corda platform.

ABI Lab, a banking research and innovation centre run by ABI for over 160 banks and 65 information communication technology companies in Italy, will leverage Corda’s distributed ledger technology (DLT) to address cumbersome, outdated and time-consuming reconciliation practices and the challenges associated with managing bilateral data sources.

In particular, ABI Lab, in cooperation with NTT Data Italia, will explore the applicability of DLT to issues such as the time taken to identify mismatched transactions between two banks, lack of a standardised process and communication protocol, and limited visibility of transactions between parties. These often result in discrepancies that are costly and complex to resolve. Corda uses DLT to provide a single, immutable record of each transaction, optimizing and simplifying the management of discrepancies occurring.

Corda can deliver a number of other benefits to the reconciliation workflow, streamlining processes both between different organisations and different departments within a bank, optimising data quality and enhancing transparency.

The aim is to verify the opportunities opened by DLT innovative technology to further applications of domestic and international banking processes.

Corda is an enterprise-grade, blockchain-inspired DLT platform that removes costly friction in business transactions by enabling institutions to transact directly using smart contracts, while ensuring the highest levels of privacy and security. It was built in close collaboration with over 100 banks, financial institutions, regulators, trade associations, professional services firms and technology companies.

PierfrancescoGaggi, President of ABI Lab, comments: “The success of this pilot will simplify the resolution of the suspended movements in the correspondent accounts between banks in terms of better efficiency, transparency and speed of this process. Starting from a simple area using DLT can be a good solution to pave the way for future implementations with a stronger knowledge on these tools generated from a sector-level project”.

David E. Rutter, CEO of R3, comments: “The manual processes and systems used for interbank reconciliation are time-consuming, costly, labour-intensive and error-prone. Working with ABI Lab we are using Corda to automate the matching process, helping Italian banks avoid mismatches and improve efficiency and accuracy across the board. This PoC will demonstrate how easy it is for banks to reduce their operational and back office costs, while saving time and communicating securely by utilising DLT.”