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The incumbent cross-border payment is piloting a new system to fight those trying to get the crown.
In an attempt to overcome the challenges of blockchain-based businesses such as the Ripplenet system and the Interbank Information Network of JP Morgan, as well as a number of other fintech newcomers seeking to steal their customers, Swift announced plans to pilot a scheme that will reduce some of the major delays and costs incurred in problems that its operation currently raises.
The Swift network, now owned by a consortium of 2,500 banks, was created for the first time in 1973 as a solution to the problem of sending money between different banks across borders and today manages about 200 billion daily of dollars of transfers. Now, according to The Financial Times (sub-requested) the team behind the network is trying to provide a technology-based solution to help with some of the 10% of transactions that are cumbersome from secretarial and registration errors.
The interbank communication platform that it proposes will try to deal with the same sore point that has been targeted by Ripple's longstanding xVia system – now part of its broader Ripplenet offering – and more recently by a clarification system based on blockchain proposed by JP Morgan, whose process was undertaken with the support of about 130 banks (compared to the 75 initially reported). However, contrary to both solutions, Swift is not trying to exploit a distributed blockchain or ledger that users can access and update as a solution to their problems. Rather, it will try to create a pre-validation system using an application programming interface (API), which allows banks to access their data bilaterally before the transfer to verify the details of the application. account and other necessary parameters valid before a transfer is attempted
Like Luc Meurant, Swift's marketing director told The FT, instead of offering the parties the opportunity to change transactions when errors occur – and recording those changes to a ledger that everyone can access, the more traditional system Swift will try to "anticipate as many problems as possible (with prevalidation) so that payments can be processed more quickly."
Ripple, on several occasions, has recently very deliberately targeted the SWIFT payment system and has expressed its intention to compete with Swift directly in the cross-border payment space. In an interview last month with Bloomberg TV, the managing director of the blockchain payment company, Brad Garlinghouse, said that "the technologies used by banks today, developed by SWIFT decades ago, have not evolved. o kept in step with the market ". he was doing with his XRP-based Ripplenet services, "he was actually taking control of SWIFT."
While JP Morgan's IIN system – which has Societe Generale and Santander among its many participants – is more than a direct competitor to the system proposed by Swift, it will only challenge the transfer and validation part of Ripple's Ripplenet system, known as xVia.
Ripplenet also has a liquidity platform, known as xRapid, which uses the Ripple cryptocurrency created, XRP, to transfer funds digitally – leveraging exchanges in certain territories as liquidity providers, which means that banks and other companies do not have to obtain liquidity for themselves when they use it. Thus, while Ripple will undoubtedly point out that it is "forward" to Swift in modernizing the process, if the system of the historical operator successfully mitigates one of the net disadvantages of the way it currently works, it will then fall on its creators to convince potentials. customers who negotiate the traditional fiat system for the cross-border encryption-based transfer option is the way forward.
While Ripplenet has undoubtedly gained ground, certainly outside the North / North American nexus of financial trade, it nevertheless attracted a truly significant slice of Swift's business away from the well-established, if somewhat dated, system. Swift's move could make the sale difficult a little harder.
Ironically, in what amounts to coverage against your system, JP Morgan is now one of the banks registered in the Swift pre-validation process. If nothing else, this highlights how uncertain even those who have a key role in this area are concerned with exactly which technology is the best way to go and who has the advantage.
