The Commonwealth Bank of Australia has been exploring the use of digital currency for money transfer operations for some time now, which we have reported earlier. Now, according to the recent reports, the bank will be working alongside other banks to make money transfer using digital currency possible.
Bitcoin has a huge role to play in foreign remittance industry. The well-known digital currency is already revolutionizing the remittance market, all thanks to negligible transaction costs associated with bitcoin and other digital currency transfers. Only other option for people to transfer money is by using conventional money transfer and remittance platforms like Western Union and MoneyGram. The transaction fee and exchange fee associated with money transfer using these operators is huge, anywhere between 5 to 17 percent of total funds depending upon the nature of transaction.
Commonwealth Bank of Australia along with other leading banks are planning to develop a blockchain based digital ledger technology to facilitate money transfer across branches and geographical boundaries. This huge project involves the likes of Barclays, BBVA, Credit Suisse, JP Morgan, State Street, Royal Bank of Scotland and UBS along with the Commonwealth Bank of Australia.
These banks are collaborating with R3 CEV, a global fintech innovations and services firm based out to New York to create the blockchain based financial network. With the new network, these partner banks will be able to handle fund transfers without having to depend up on the Central Bank for processing transactions. This will also help the banks reduce transaction costs associated with fund transfer as they can forego various fees charged by SWIFT, Central Bank and other parties who are otherwise involved in conventional fund transfer methods.
While Commonwealth Bank is independently testing blockchain based solutions provided by Ripple Labs, the new project with R3 CEV will complement the Ripple Labs trail. This way, the banks will also get a chance to evaluate two different solutions and pick the best out of them for their day-to-day operations.