Finality unveils designation for digitized transactions; £20 million financing revealed
In a significant move towards enhancing operational efficiency and risk management in institutional settlements, Fnality, a network for settling large-value payments using tokenized currencies, has introduced an earmarking feature. This innovative mechanism reserves specific funds or assets for a transaction before settlement, thereby improving certainty in clearing and reducing transaction failures.
The earmarking feature, which ensures atomicity in transactions, means that all the legs of a transaction either fulfill together or they all fail, with no leg-risk. This feature was developed with the participation of Lloyds Bank, Santander, and UBS, the first banks to go live on the sterling Fnality payment system (£FnPS).
By lowering failure rates, earmarking helps institutions avoid penalties related to failed or late settlements. The impact of earmarking on penalties and transaction failures is substantial, as it minimizes liquidity shortfalls that could result in settlement delays or failures.
In its first full year of operation, Fnality International did not earn any revenue. However, the company managed to raise a total of £77.7m ($103m) in Series B funding in 2023. Goldman Sachs, BNP Paribas, and DTCC were among the investors in this round.
Fnality is planning to launch a dollar version of its settlement system, and the name of the new US subsidiary is Fnality XB, a nod to plans for cross-border payments. The earmarking feature adds to the 24/7 instant payments previously showcased for margin payments, FX swaps, and repo transactions on the £FnPS.
The earmarking feature is designed to be interoperable with other DLT systems, aligning with best practices in institutional settlement platforms and liquidity management mechanisms widely discussed by industry providers like Clearstream in their securities settlement services manuals.
John Whelan, Managing Director of Digital Assets at Banco Santander, stated that the earmarking feature brings the utilization of blockchain technology at scale in the banking industry one step closer. Fnality International's biggest goal is to expand FX settlement once a second currency goes online.
In 2019, Fnality International raised a total of £50 million ($66m) in Series A funding. Despite losing £28.9 million for the year pre-tax in 2024, Fnality International had almost £34 million in cash on hand at the year end.
Fnality is backed by 20 of the world's largest global financial institutions, positioning the company well for its planned expansion. The company's innovative earmarking feature is set to revolutionize institutional settlements, providing a more efficient, secure, and cost-effective solution for financial institutions worldwide.
- The earmarking feature, a significant innovation in Fnality's network for settling large-value payments using tokenized currencies, aligns with best practices in institutional settlement platforms, positioning it to be interoperable with other DLT systems in the finance industry.
- The participation of Lloyds Bank, Santander, and UBS in the development of Fnality's earmarking feature indicates a move towards scaling the utilization of blockchain technology in the banking industry, as stated by John Whelan, Managing Director of Digital Assets at Banco Santander.
- Fnality International's earmarking feature, designed to minimize liquidity shortfalls leading to settlement delays or failures, could potentially reduce penalties and transaction failures for financial institutions, leading to increased operational efficiency and risk management in the industry.
