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The 45-year payment provider Swift has just announced the launch of a new payment validation platform. The new platform aims to counter the growing competition from fintech companies and blockchain-based projects, lowering costs and accelerating financial transactions worldwide.
fast it was founded in 1973 by a conglomerate of American banks. These banks were looking for a way to transfer money around the world more quickly and easily. Today, Swift is used by 2,500 banks worldwide and manages 200 billion dollars every day.
In recent years, however, fast has faced the growing competition of a growing number of fintech competitors. Inefficiencies within the Swift ecosystem have made it vulnerable to newer and more efficient payment technologies.
Startups like Revolut and TransferWise, for example, have been integrated into Swift's market share.
Blockchain technology also poses a threat to Swift. One of the most promising startups in the blockchain space is Interbank Information Network (IIN), a blockchain-based project in which banking information is shared on a distributed ledger. To date, over 130 banks, including JPMorgan Chase and other important names, have signed with IIN. With IIN, errors and compliance issues can be solved quickly. With traditional payment systems, these problems can delay payments for weeks.
That's why Swift wants to innovate. Swift has launched its own validation system to compete with fintech companies and blockchain startups. This validation system is currently undergoing a pilot project, although it could be implemented for Swift's 10,000 customers in the near future.
Swift is testing a new system of "pre-validation" of payments
In response to the competition, Swift announced the launch of a pre-validation payment system for banks.
This system is expected to accelerate long delays in payments. Just as the IIT system removes expensive delays, so does the Swift pre-validation system.
With the new Swift system, banks use an application programming interface (API) to check data from other banks. This data can include bank account numbers, for example, when a payment is initiated. The system checks these bank account numbers, verifies the legitimacy of these numbers, and then validates the payment.
To be clear, the Swift pre-validation system does not provide for the use of blockchain; instead, it's an API interface. There is no mutually distributed ledger. The API allows banks to reciprocally access data on a bilateral basis. Banks choose to share data with each other.
10% of fast payments are delayed due to errors
Disputes related to payments are a significant problem with Swift. According to the Financial Times, around 10% of payments on the Swift platform are delayed due to errors.
It is expected that the new system will significantly reduce the costs incurred by banks to solve problematic payments. It also accelerates the payment process for customers.
After the adoption of this system, banks can be expected to reduce prices and compete more effectively with the new fintech startups.
Some analysts believe that Swift's API-based solution could be more valid than IIT's blockchain solution. An analyst interviewed by the Financial Times believes that Swift's solution is superior because it addresses "exactly the same type of IIN problems" but could be implemented more quickly, allowing Swift to exploit "scale and industrialization" among its more than 10,000 members.
Swift solves the problem of payments without blockchain
Ultimately, the new Swift pre-validation system aims to solve payment problems just like the IIT system. However, the IIT system depends on the blockchain technology while the Swift system depends on an & # 39; API. The two achieve similar goals but in different ways.
It remains to be seen which system will be more successful in the long run – a blockchain-based system or API. However, greater competition within the payment space is good news for consumers.
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