Payment and Settlement Technology Provider: Baton Systems

In January 2016, the Bank of England (BoE) announced it would develop a blueprint to modernise the UK’s Real-Time Gross Settlement (RTGS) system in response to changing needs. Two years later, the UK’s central bank has completed several proofs of concept to understand how a renewed RTGS could support settlement in systems operating on innovative payment technologies. 

One of the firms the BoE partnered with was Baton Systems. Baton has developed a distributed ledger network that integrates with financial institutions’ existing infrastructure, directly connecting disparate ledgers. The result is a fast, regulatory compliant payment and asset management system, fully transparent to each party on the network. 

During the BoE’s project, Baton connected its distributed ledger technology (DLT) platform to the BoE’s application programming interface (API) and simulated the process of making settlements on behalf of member banks. The system demonstrated the ability to set minimum balances, make margin payments, fund and defund accounts, and settle obligations using central banks’ money. The BoE also noted that Baton managed to demonstrate both a bilateral and a multilateral net settlement of trades process through their ledger. 

Unlike other blockchains, Baton’s can support upwards of a billion ‘events’ a day and does not require a critical mass of participants nor conversion to digital or crypto assets. “It integrates seamlessly with a firm’s existing payment rails and operations – including blockchain – for efficient implementation, scalability and customisation of post-trade applications using Baton APIs,” says Arjun Jayaram, founder and chief executive of Baton. 

While the BoE decided its own RTGS system would not be based on a DLT structure, experiments with Baton supported the central bank’s decision to ensure the renewed payments network would be capable of connecting to such frameworks. Citi and CME Group are among Baton’s private sector clients. 

In 2018, Baton partnered with a major global bank to create a post-trade solution for spot foreign exchange transactions. Since going live, the bank has used the system to settle 3 million forex transactions and more than 250,000 payments, totalling $500 billion. In addition, the time for clearing and settlement has decreased from 48 hours to three minutes. 

Currently, the platform settles six currencies, but Baton plans to test at least six more in the year ahead, extending the number it handles to around 10 by year end. 

Development is ongoing. In March 2019, Baton launched its DLT solution onto the Oracle Cloud Marketplace and Open Banking Digital Innovation Platform. In doing so, Baton has provided financial institutions with a cloud-based API cross-border payment and settlement solution. With multiple top-10 global banks and large central counterparties on board, the platform now settles $12 billion a day.

Read the full Central Banking FinTech & RegTech Global Awards 2019 Winners In Focus report