Ever since cryptocurrencies appeared in the financial landscape, they have proven to be highly efficient instruments to transact with. An average operation with a cryptocurrency usually lasts just a few minutes, an issue that the banking sector has been definitely fighting against for so long, and that’s without including the extremely high fees the sector charges per transaction, another problem cryptocurrencies have managed to solve.
In this matter, one of the cryptocurrencies that have shown remarkable advances with respect to cross-border payments is without any doubt Ripple (XRP). Through Ripple Labs, the company has created a package of solutions integrated on products such as xCurrent and xRapid, products that attack specific problems of the industry such as privacy of the data, costs, speed, and liquidity.
Ripple has managed to collaborate with several bank institutions across the globe; is currently partnered with at least 100 banks, and the truth is, this seems to be just the beginning. Ripple has stated its next primary goal is that major bank entities would fully adopt their product xRapid at the end of the year, a fact that, of course, puts Swift, the current cross-border payment platform in use, in not the best position.
Let’s see how this rivalry goes!
The first touché of Ripple
Back in April, Ripple made an audacious move by partnering with one of the largest banks in the world, Banco de Santander. The agreement was to collaborate in the elaboration of a blockchain-based service that would allow the users of the bank in the UK, Spain, Poland, and Brazil to make transactions using different currencies.
The strategic alliance represented a breaking point for Swift as Banco de Santander is one of the major bank entities in the world. And if we count the signings the company is doing with financial institutions every day; the current payment platform has for sure everything to lose.
As a matter of fact, Ripple has managed to ally with at least 100 banks to the date, among we can find, of course, the mentioned Spain bank which now appears very happy with the results of the collaboration with Ripple.
Regarding that, the head of operations, technology, and innovation of the bank, Ed Metzger, stated the results were very positive, he said,
“We have had very positive feedback and good take-up. It gives the customer much more certainty over how much money will arrive in the destination account.”
The blockchain has demonstrated to be a much cheaper, quicker, and efficient technology when it comes to treating cross-border payments, so this can definitely mean a check warning for the correspondent banking system Swift.
The Swift’s Reply
As it was expected, Swift decided to counterattack and made some improves in its messaging platforms, at the time that started as well the testing of the blockchain technologies to give Ripple a taste of its own medicine.
However, as the test that involved 34 bank entities from all around the world concluded, it all appears like it would be tough to fulfill the scalability goals using a blockchain system, which proves, of course, the skepticism the company keeps regarding the cutting-edge technology.
Regarding this, the head of banking at Swift, Harry Newman, said that the,
“Blockchain technology is not straightforward to scale and it is not yet appropriate to do so”
He continued and commented that he understands the correspondent banking model is an old-fashioned invention of 1998, but when it comes to speed, Swift has already managed to do payments in just a matter of minutes using the Global Payment Innovation system.
“If you don’t have money on the blockchain you are just doing a different kind of messaging system for correspondent banking”
The main issue in the crypto sphere and its solution
As we know for a fact, the primary concern of the crypto community and the focus of many of the detractors of the sector focuses on the volatility cryptocurrencies have shown during its existence. In this matter, a more prominent commented solution has been the creation of the dubbed ‘stablecoins,’ an invention that may not be so far from its inception.
The idea is to build up a cryptocurrency token backed by fiat currencies deposited at central banks across the globe. As of the moment, Circle, the cryptocurrency, and payment group based in Boston have already started a project to create the USD coin, the first crypto of the ‘stablecoin’ type.
Although this project is very much unlikely to solve the situation between Ripple and Swift, it may offer a solution for one of the most significant issues of the industry.