Is the fintech challenger’s promotion of blockchain as the future of cross-border payments more convincing than the long-established SWIFT’s payments initiative?

Will the future of cross-border payments be determined by SWIFT or Ripple? The two are regularly portrayed as pugilists slugging it out in the ring: SWIFT, the 45-year old banks-owned veteran interbank messaging service, now fiercely defending its corner against Ripple, the six-year old Californian challenger that has promoted blockchain technology and its own XRP cryptocurrency as the key to making payments faster, cheaper and more reliable.

Competition between the two contenders has been heating up and by the time SWIFT hosted its annual Sibos conference in Geneva two years ago, Ripple had established itself as a serious challenger to SWIFT’s decades-old domination of cross border payments.

The 2016 event saw SWIFT bang the drum for its global payments innovation (gpi) initiative against sniping from Ripple, which homed in on what it regarded as gpi’s shortcomings. At the same time, Ripple also announced that several major banking names were signing up as members of its newly-formed Global Payments Steering Group (GPSG) to oversee the development of global payments based on distributed financial technology.

Since then, the duo has continued to publicly trade barbs. SWIFT officially launched gpi in February 2017, promising a faster, more transparent and traceable cross-border payment services for users that offered same day use of funds, end-to-end payments tracking and the delivery of unaltered remittance information.

Initially live with 12 member banks, gpi has steadily grown to more than 180 participants. The aim is for universal adoption by 2020, with all 10,000-plus banks on the SWIFT network adopting gpi.

SWIFT reports that already more than US$100bn in gpi messages are sent daily, accounting for 25% of the cross-border traffic on its network. Almost half of gpi payments are executed in less than 30 minutes and nearly all are completed within 24 hours.

Enhancing standards

The latest enhancement of the service was announced last week. SWIFT said that 22 participants – ten major multinational corporates and 12 major global banks – would begin piloting a new multi-bank standard to improve the cross-border payments service for multi-banked corporates.

According to the co-operative: “This enhanced standard… streamlines the process for corporate treasurers by allowing them to initiate and track gpi payments to and from multiple banks in a single format and integrate gpi flows in enterprise resource planning (ERP) and treasury management systems (TMS).”

The names signed up for the pilot make an impressive roll call, with Airbus, Microsoft, General Electric and Roche among the corporates and Bank of America Merrill Lynch, Citi, J.P. Morgan and Deutsche Bank as participant banks.

Microsoft’s Group Treasury Manager, Lisa Wagner, commented: “The ability to access a greater level of payment information in a timely manner through SWIFT gpi will bring immediate benefits to our payments experience with greater transparency and responsiveness to our vendors. Providing multi-bank information all in one place and in the same format fits into our modern finance roadmap.”

While the latest initiative sounds impressive, Ripple’s response to new developments in the gpi service is usually that it can do the same, but better. Speaking at the Hong Kong event in late June, Ripple’s director of joint venture partnership, Emi Yoshikawa, dismissed improvements to gpi as marginal because “SWIFT was built 40 or 50 years ago, before the internet was created. So their architecture is very old. They realise that this is a big problem and they consider us a big competitor.”

Not yet blockchain’s hour?

A major differentiator between the two rivals is that SWIFT is lukewarm towards blockchain. Having trialled the technology last year it decided that while the results were encouraging, blockchain wasn’t yet sufficiently developed for it to be deployed globally.

Wim Raymaekers, SWIFT’s Global Head of Banking Market, recently confirmed: “We are still experimenting with blockchain, but as others have acknowledged, it isn’t ready for wholesale payments, much less in the cross-border area. We will continue to look at and develop technologies that could help improve the cross-border payments experience even further – using application programming interfaces (APIs) for instance.”

Yet Ripple has been able to attract more than 100 financial institutions to its enterprise blockchain network. In April this year, Banco Santander announced the launch of One Pay FX, the first blockchain-based international money transfer service using xCurrent, a technology based on Ripple’s distributed ledgers. Initially offered to retail customers in four countries – Spain, the UK, Brazil and Poland – the service will be steadily rolled out to other countries.

“Blockchain technology offers tremendous opportunities to improve the services we offer our customers, and the launch of One Pay FX is the first of many potential applications,” declared Santander’s Executive Chairman, Ana Botín.

However, while many banks are ready to use Ripple’s messaging services, they are markedly less keen on adopting its XRP cryptocurrency. On its website, in response to the FAQ ‘How many financial institutions have adopted XRP?’ Ripple answers:

“MoneyGram, MercuryFX, IDT, and Cuallix — four major payment providers — have publicly announced their pilot use of XRP in payment flows through [XRP-based] xRapid to provide liquidity solutions for their cross-border payments. Ripple also has a robust pipeline of financial institutions who plan to use XRP through xRapid in their payment flows in the near future.”

Perhaps more detail on this ‘robust pipeline’ will emerge in late October, when the two contenders square up in Sydney at Sibos 2018 for the latest round of their tussle.