Is Ripple facing a threat from 40 years old SWIFT for cross border payments?
Ripple promises faster, and more transparent cross border payments from any two points across the world. This looked like a dream to many in financial Institutions who are inherently depended upon SWIFT for all cross border payments.
However, this dream is SWIFT’s (world biggest payment service provider ) nightmare as Ripple is actually able to instantly transfer money from any one end of the world to another. In response SWIFT launched its own initiative - SWIFT GPI - based on Blockchain technology to counter Ripple.
What is SWIFT Doing?
Although Swift provides cross border payment services to over 11,000 banks across the globe, but to start with Swift worked with closed group of 8 banks to test new technologies based on distributed ledger technology.
In a 3 phase approach SWIFT is targeting to:
- Phase 1: Achieve greater efficiencies in B2B payments
- Phase 2: Digital Transformation of Cross Border Payments
- Phase 3: Use DLT in cross border payments
Threat to Ripple - 110 banks representing >75% of global cross border payments are on SWIFT GPI
Currently 110 world’s biggest banks like Citi, Deutsche Bank, JP Morgan are onboarded in Phase 1 of SWIFT GPI which is currently live. This brings a direct threat to success of Ripple since banks already trust SWIFT and are working with it since ages. It becomes difficult for banks to switch their payment service partner (a crucial backbone for the banking business) and trust a 5 year old Fintech to handle such payment volumes.
How Ripple Reacted?
Ripple hired SWIFT GPI’s senior Sales executive to sell Ripple to MNCs
Marjan Delatinne, with 20 years of Sales experience and most recently 10 years with SWIFT, has joined as Ripple’s Sales Director for Europe. Thus she will sell Ripple to same set of target clients where she was tasked to sell SWIFT GPI.
In her words
My previous experiences convinced me that the financial industry is in dire need of technology that facilitates faster payments. The industry is looking for modern payments solutions which are built on the latest technology, not outdated infrastructure. Ripple understands how banks function and has adapted to serve them, whereas the incumbents have lost touch with what banks and banks’ customers really want
Who will win SWIFT or Ripple?
Well its ultimately Banks who stands to win in this rivalry as Banks will get to live their dream of Faster, Transparent, Efficient and less costly cross border payments across the globe.
It is premature to say Ripple will replace >40 years old and yet evolving SWIFT organization which is deeply rooted in the banking industry for all aspects of cross border payments. If their is one criteria that banks bet on for selection of service provider that is Trust or Counterpary Risk.
RIpple is making inroads in domestic payments, or commercial payments but grabbing attention of banks for Cross border payments is a long road ahead.
Sources and further reading
- https://ripple.com/insights/ripple-hires-former-business-director-swift-gpi-marjan-delatinne/
- https://www.swift.com/our-solutions/global-financial-messaging/payments-cash-management/swift-gpi
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Isn't that spam?
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