A rivalry is raging at the moment and it is all going to decide how payments across the border are going to be handled. This will set how things are done for decades and it is a contest that helps to encapsulate the debate for both blockchain and numerous cryptocurrencies as well. It is putting a start-up company against a ton of new technologies with a group that has been established for quite some time. So in the blue corner, you have Ripple. This is a Californian company and they started out in 2012. They promised the world that they would make payments faster and they have also said that they would make it more reliable as well. They have stated that they have a plan to do this by using cryptocurrency and blockchain as well. In the red corner, you have Swift. They have well over 45 years of experience when it comes to interbank messaging and they handle well over half of the world’s high cross-border payments. It is run by thousands of member banks and this is something that a lot of people don’t happen to agree with.
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So what is the issue? Ripple caused a lot of tension for the payment industry in April. They made the decision to try and team up with Banco Santander. Their idea was to try and launch a service that is based on the blockchain messaging service. This would allow the Spanish bank’s main customers in Poland, Spain, the UK and even Brazil to send their money to just about anywhere in the world. So there are some growing pains with this and customers demanded something to be done about this. Ripple heard, and then introduced OnePayFX. Ed Metzger is the head of innovation for Santander and he has said that he has had some very positive feedback about this. He has also stated that the customer has much more certainty as to how much money is going to arrive at the account on the other side of the pond. Santander is one of the 100+ institutions that have chosen to team up with Ripple and they are going to use their own blockchain messaging system to try and give banks the chance to communicate with one another. This is known as being XCurrent, and the best thing is that all of this can be done in seconds.
Asheesh Birla has stated that they are signing up for a new financial institution every single week. Asheesh Birla is the senior-vice president over at Ripple. A lot of people believe that because Ripple has rocketed in price, and that scores of similar blockchain payments cannot compete, this could mean that Ripple have a high chance of success here.
Blockchain can be far quicker when compared to other methods and it is also much cheaper as well. You also have a much higher chance of sending money between currencies without compromising on accuracy. Swift is based on the traditional banking system and this ultimately means that it is slower and much harder to make payments.
Swift have responded to the threat of Ripple coming in by stating that they have improved the efficiency of their own messaging system. They have also stated that they are carrying their own potential business plan that involves blockchain, to try and speed up their own payments so that Ripple will no longer come with an advantage. It is no secret that the Swift banking model is all the way back from 1998 but they are now apparently working to try and bring it into this current year. Harry Newman is the head of banking for Swift but when you look at speed, he doesn’t really see the problem with what they have in place right now. They have said that the whole thing has the ability to make payments in minutes or even seconds, and that this is a huge step forward for the company.
Swift have also worked to try and release an upgraded service. This is known as being Global Payments Innovation and it is being used by well over 165 banks at the moment. When you look at some of the payment corridors, such as the US and China, you will see that it handles around 40% of the transactions.
Newman has come out and stated that the improvements are evident and that half of the payments that are being made through the system within half an hour. When you look at the blockchain tools, Swift is having a hard time trying to hide the fact that they are sceptic at the mere thought of blockchain. Swift have admitted that they carried out a test and that they would find it hard to conclude the full model on the scale required, and this is even the case if they implemented a blockchain system.
If Swift want to avoid any confidential information from being seen by rival banks then they would have to establish more than 100,000 subledgers. This would accommodate 11,000 member banks and this is impractical to say the least.
Contrary to popular belief, blockchain technology is not as straightforward as you would have thought and Swift also believe that it is not appropriate to integrate it in the way that Ripple have. Newman has stated that all of the announcements that have come as the result of other banks using blockchain all come from them being either in-house or even as bilateral projects. He believes that when you bring the sheer scale of everything.
Mr Birla who is at Ripple, has come out to say that the scalability issue has already been dealt with and they did this three years ago. They have stated that they have been able to connect banks in the way that the internet connects people, so it is only the banks who get to see each other’s information. One problem with Ripple is that a lot of banks only use half of its own solution. This is the messaging part. They shun the idea of having XRP as a currency and this is meant to be the bridge that binds everything together. If you don’t have money on the blockchain then you really are just doing another type of messaging system and this is especially the case when you look at correspondent banking. This has come from Mr Newman himself, and he strongly believes that cryptocurrency is just not fit for purpose.
Stable coins are an option, and several groups are working to try and make this happen. Circle is a cryptocurrency payment group in Boston and they are working hard to try and create the USD coin. This is a token and the companies involved have all done their part to try and raise money from investors. The idea is to try and avoid the volatility to come from Ripple, but only time will tell.