Three tech companies in Italy, including SIA, recently announced that they are working with the nation’s central bank to develop a national blockchain network for the sureties sector.
About SIA
SIA is a well-known company in the financial technology sector. It is one of the key partnerships in the EU’s SEPA payments network. The network processed over three billion payment transactions and over 7.2 billion card transactions in 2018.
The company was created in 1977 and operates as a provider of technology infrastructure and services in the financial sector for central banks, corporates, financial firms, and the public sector. Its main area of focus is cards, payments, capital markets, and network services. SIA Group offers its services in 50 nations and has operations through its subsidiaries in Germany, Hungary, Serbia, Romania, South Africa, Slovakia, Czech Republic, and Croatia.
Solving Issues in Italy’s Sureties Sector
In November 2019, a damning report by an Italian news organization revealed that the sureties sector in Italy was fraught with fraud. In Italy, when a company is acquiring a contract to deliver on a construction project or a service in the public sector, they have to guarantee they can fulfill the contract. As a result, most firms turn to banks and insurance firms that provide a guarantee for them.
While this sounds great on paper, things are not working how it was intended. The news report revealed that since 2015, about 1.6 billion euros in fraudulent sureties had been issued. It is one thing to provide a fake document. However, companies were getting real sureties documents that were provided by corrupt sureties’ providers. As a result, the guarantees were worthless if anything went awry. The result was that suppliers were paying premiums for worthless pieces of paper.
Solving the Problem Using the Blockchain
The blockchain project will include the central bank of Italy, which has created a list of approved guarantors through a rigorous internal process. Besides the central bank, Italy’s insurance regulator, the IVASS is also taking part in the project. As a result, sureties will be digitized and their legitimacy can be verified using the blockchain.
According to the announcement by SIA, this project was agreed upon after a four-month study involving thirty organizations in various fields such as banking, insurance, and the public sector. The project will start in January 2020 as part of a pilot project.
Similar Projects
This is not the first time SIA is working on such a project in Italy. In February 2019, SIA carried out a similar project for the Municipality of Bari. The project’s goal was to reduce the time it took to process sureties, eliminate human errors that occur during manual input, and prevent fraud. It did so by the dematerialization of the issuance process by financial firms, banks, and insurers. As a result, it was possible to certify sureties irrevocably using the blockchain.
Summary
It’s no secret that countries across the globe are experimenting with Blockchain technology. This is one of the reasons so many people believe “blockchain tech” will take off before actual cryptocurrency. Blockchain has the ability to solve macro issues that haven’t been touched in decades. The narrative in 2019 was large financial institutions announcing interest in the framework. 2020-2021 will be the years of actually executing on many possibilities to streamline finance globally.
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