SWIFT challenges Ripple: Global instant payments for SMEs

  • The company behind the global standard for all international money transfers, SWIFT, has announced that it will expand its operations and may put Ripple in trouble with it.
  • SWIFT plans to a target the market for small and medium business transactions and could become Ripple’s biggest competitor for cross-border payment solutions.

Ripple is undoubtedly one of the most controversial projects in the crypto sector, not only because of the controversy surrounding its centralization, but also because of its potential. While the XRP Community considers Ripple and the XRP Ledger to be a groundbreaking technology that will revolutionize the existing banking system, critics see no chance for the technology to be applied on a large scale, as banks will develop their own systems that will make Ripple obsolete.

In this context, many consider SWIFT (Society for Worldwide Interbank Financial Communication), the current standard for all international transfers, to be Ripple’s biggest competitor. As FinExtra reports, SWIFT has now launched a major push to enable small and medium-sized businesses to make instant payments. As the financial portal writes, SWIFT is taking what is arguably the most significant step since the company was founded in the early 1970s, with the decision to allow account-to-account and business-to-business transactions, according to the announcement:

SWIFT will enable instant and frictionless payments from account-to-account anywhere in the world, with an end-to-end solution that combines international and domestic capabilities. This ambitious platform expansion means SWIFT will support financial institutions to strengthen their positions in B2B payments and capture new volume in SME and consumer segments.

At its March 2020 meeting, the SWIFT Board and Executive endorsed ambitious plans for SWIFT to support financial institutions’ payments and securities businesses and make the SWIFT platform richer, smarter and faster. SWIFT will enable transactions to move instantly and frictionless from account-to-account anywhere in the world across the end-to-end payments chain.

With this step, SWIFT will enter into direct competition with VISA, Mastercard but also Ripple. Until now, the company has concentrated on high-quality, system-relevant payments. Now SWIFT will also attack the market for “banal low value payments”, as Andy Schmidt, Vice President and Head of Global Industry at the consulting firm CGI wrote. According to Schmidt, this marks a monumental step within the banking sector:

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It is an understatement to say that this is a huge change of direction for SWIFT. Perhaps driven by the fact that as SWIFT is owned by the banks, the change of direction might enable the banks to take control of the interconnectivity of new instant payments schemes which are either live or rolling out all over the world.

Currently there are two other major players moving rapidly to try to own this market, the aforementioned VISA and Mastercard, which are interestingly now not owned by the banks!

How, when and if the announcement will affect Ripple and its XRP ledger remains to be seen, of course. Nevertheless, it has to be stated that Ripple has identified small and medium-sized enterprises (SMEs) as a source of revenue with strong growth for quite some time. In a 2019 whitepaper on this area of business, Ripple wrote that the opportunities in cross-border B2B payment transactions by SMEs in emerging markets are particularly great and that the transaction volume of SMEs in emerging markets has reached USD 100 to 150 billion annually.

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About Author

Jake Simmons has been a crypto enthusiast since 2016, and since hearing about Bitcoin and blockchain technology, he's been involved with the subject every day. Beyond cryptocurrencies, Jake studied computer science and worked for 2 years for a startup in the blockchain sector. At CNF he is responsible for technical issues. His goal is to make the world aware of cryptocurrencies in a simple and understandable way.

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