SWIFT supports most global bank transfers through its messaging network, while Ripple uses XRP to make cross-border payments faster and cheaper.
In addition to payments, XRP is also used for remittances and is exploring tokenized loyalty and DeFi applications, with institutions like SBI Holdings testing integrations.
SWIFT is developing a blockchain-based ledger for real-time payments, interoperating with major networks and supporting tokenized assets.
SWIFT still faces challenges such as outdated systems, regulatory hurdles, institutional inertia, and competition from Ripple's expanding network.
The global cross-border payment scale reaches trillions of dollars annually, dominated by two main entities: the long-established SWIFT (Society for Worldwide Interbank Financial Telecommunication) and the emerging force Ripple, which is centered around blockchain technology. SWIFT operates a vast global network but has relatively slow transaction speeds; Ripple achieves near real-time settlement using XRP. With the accumulation of technology and reputation, Ripple has become an efficient alternative to SWIFT's old high-cost system.
However, SWIFT has now taken proactive measures. It is collaborating with Consensys to develop a shared ledger aimed at directly competing with Ripple. This article will analyze how SWIFT's system operates, its blockchain plans, and the challenges it faces.
SWIFT is at the core of global bank communications. It does not directly transfer funds but allows banks and payment service providers to exchange cross-border transaction instructions through a secure, standardized messaging network.
When a customer remits money overseas, their bank sends a secure payment message to the receiving bank via the SWIFT network, including account numbers, amounts, and reference codes. Each bank has a unique SWIFT/bank identifier code (BIC) to ensure messages are accurately delivered to their destination.
SWIFT is a trusted intermediary in global finance, providing encrypted, authenticated, and reliable messaging services to over 200 countries. Standardized communication reduces error rates, speeds up settlement, and supports compliance requirements. For decades, SWIFT has been the infrastructure for international fund transfers.
Data shows that SWIFT was established in 1973 in Belgium, created by 239 banks from 15 countries, aiming to replace the slow and error-prone telex system with faster and more secure financial communication.
International payments made through XRP can reduce or eliminate pre-funding, accelerate settlement, and lower costs. Japan's SBI Remit uses XRP for remittances to the Philippines, Vietnam, and Indonesia. Similarly, Pyypl integrates XRP through Ripple's On-Demand Liquidity (ODL) for remittances between parts of Africa and Asia, targeting unbanked users.
In addition to payments, XRP is also being integrated into travel and loyalty services. For example, Webus/Wetour plans to use XRP (backed by a proposed $300 million reserve) to provide blockchain-based vouchers and loyalty points for Air China's Phoenix Miles members. These members may use XRP for overseas services in the future, such as airport transfers and high-end rides.
Institutions are increasingly viewing XRP as a key operational and financial asset. For instance, SBI Holdings not only invests in Ripple but also integrates XRP within its subsidiaries (SBI Remit, SBI VC Trade) and maintains a large reserve of XRP.
The XRP ledger is a high-speed, low-cost blockchain widely used for cross-border payments, tokenized assets, and decentralized finance (DeFi) projects. It employs a consensus protocol rather than a mining mechanism, significantly reducing energy consumption and operational costs compared to proof-of-work networks.
SWIFT's blockchain project aims to achieve interoperability between public and private chains and handle regulated stablecoins and tokenized assets, making it a multifunctional infrastructure for the future.
The core feature of the project is to enable real-time cross-border payments. The system is designed to enhance rather than completely replace existing digital infrastructure, facilitating integration for financial institutions with current systems and lowering adoption barriers.
SWIFT is adopting blockchain technology in an effort to maintain its central position in global payments amid the growing popularity of stablecoins and networks like XRP. The project aims to modernize infrastructure, keeping banks within the SWIFT ecosystem and solidifying its dominant position in international finance.
Data indicates that Ripple's technology can achieve settlement on the XRP ledger in 3 to 5 seconds, while SWIFT-based cross-border transfers typically take 1 to 5 business days.
SWIFT's blockchain project builds on its long-standing dominance in global banking and settlement. Its network is already connected to thousands of banks and financial institutions worldwide, a scale that may be difficult for Ripple to match. Ripple's ODL system uses XRP tokens as bridge currencies, still providing faster and cheaper cross-border payments. For SWIFT, the main challenge is to enhance liquidity to reach the efficiency level of Ripple's ODL model.
Network effects will also play a significant role. Since most institutions are already connected to SWIFT, banks may find it easier to adopt its new shared ledger than to switch to Ripple's system. For Ripple, convincing financial institutions to switch networks remains a significant challenge. SWIFT's neutral stance on tokens and settlement methods may also help it maintain an advantage over Ripple.
While Ripple's model relies on XRP as a bridge asset, SWIFT's upcoming ledger aims to support a broader range of regulated tokens, including stablecoins and tokenized assets. This flexibility could undermine XRP's dominance in cross-border settlements, especially if banks shift to multi-asset payment systems.
Did you know? Ripple's On-Demand Liquidity (ODL) has been used by Japan's SBI Remit for remittances to countries like the Philippines and Vietnam.
SWIFT's blockchain project still faces potential obstacles that could slow its rollout. One of the biggest challenges is connecting the new system with existing banking infrastructure while maintaining technical compatibility. Since SWIFT operates a long-established global messaging network, smoothly collaborating with distributed ledgers without disrupting current services will be a complex task.
Another significant challenge is regulatory compliance across jurisdictions: differing rules for digital assets, stablecoins, and tokenization could complicate cross-border deployment. Additionally, many financial institutions are cautious; they may hesitate unless the advantages of the new infrastructure are clear and risks are mitigated.
SWIFT also faces fierce competition from Ripple's long-standing partnerships, which focus on real-time settlement. Unless SWIFT can demonstrate clear and measurable advantages, its blockchain project may be seen as a supportive effort rather than a leading solution.
Looking ahead, SWIFT's blockchain ledger could reshape the global payment landscape in two ways. It may coexist with Ripple, continuing to maintain dominance in the regulated banking sector, while Ripple focuses on liquidity and settlement efficiency in emerging markets. Alternatively, SWIFT could gradually surpass Ripple, leveraging its vast network to reduce the industry's reliance on proprietary tokens.
This competition will determine the future of cross-border payments. Ripple's response is crucial. The rivalry between the two is expected to accelerate innovation and foster collaboration with fintech and regional banks, leading to more practical applications.
Ultimately, the deciding factors will not only be the technical merits. Network effects, institutional confidence, and alignment with the overall goals of global finance will also play important roles.
Related: Ethereum (ETH) is expected to return to $4,500, as the futures market stabilizes after the cryptocurrency flash crash.
Original article: “Can SWIFT's Blockchain Challenge Ripple's Dominance in Payments?”
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