ATOMIC SETTLEMENT
What an atomic settlements boom could mean for the payments industry George Iddenden
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s the UK continues to try and place itself as a leader in the payments industry and fintech, maintaining a degree of pace, security and efficiency must remain a priority. With the growth of blockchain technology and fasterpayment solutions, the concept of atomic settlements is promising to usher in a new era for secure, digital payments. Touted as the next move in the financial sector’s faster payments revolution, atomic payments have the opportunity to reduce settlement risks, increase efficiency meanwhile slashing costs. However, like most new concepts, there are currently some significant barriers to widespread adoption across the industry. The concept of atomic settlements relies on all parts of a transaction being completed, or none of it occurs. This process is mainly used to maintain the integrity and security of financial systems while new technology such as Faster Payments and blockchain becomes more influential. Businessfinancing.co.uk managing director Ian Wright likens the technology to making an in-person transaction with cash. He tells Payments Review: “Atomic settlements happen instantaneously, you could compare it to the act of paying for goods in person; in cash, the transaction happens simultaneously and reduces risk as both parties have to have their side of the trade available.” Why is it important that the UK gets atomic settlements right? The UK has done well to position itself as a dynamic centre of finance for the globe so far, with London fostering a new level of innovation in the fintech and cryptospace over the past decade. Among the many groundbreaking concepts that have gained momentum in recent years, atomic settlements have quietly and persistently been reshaping the financial landscape in the UK. Despite its tentative introduction to the UK sector paying dividends, the technology hasn’t yet exploded across the sector. The importance in the UK leveraging the power of atomic settlements is pivotal to maintaining its reputation as a global financial hub. Its role as an innovation centre and a hub for research in the financial industry benefits businesses worldwide.
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For the majority of financial institutions, the appeal of the industry adopting atomic settlements is fairly black and white; increased financial security benefits all.”
With any new, positive unharnessed technology impacting the financial sector, the UK should be at the forefront of adoption. Atomic settlements have the potential to transform the global financial sector by offering banks, fintech firms and other financial services institutions exchanges that are faster, more cost-effective, accessible and trustworthy. “For instance, there have been major partnerships between firms such as Swift and Wise, and Visa and Currencycloud, all teaming up to enhance cross-border money movement and respond to demand by speeding up these payments processes. These trends highlight why digitisation is so vital to turn atomic settlements into more than just a pipe dream.” The need for intermediaries diminishes with atomic settlements; this can help reduce transaction costs, enhance transparency and improve security in the long term. While there is no doubt that there are challenges in the way in the forms of regulation and issues surrounding scalability, an atomic settlements boom in the UK would go a long way in building a more efficient, secure and inclusive financial system for all.
