- Speculation hits fever-pitch after Ripple announces participation in Sibos cross-border payments event
- Rumours of impending deal intensified after Santander/RippleNet-SWIFT partnership
- Ripple-SWIFT deal appears in line with Ripple’s history of partnering with rival financial institutions
A prominent crypto-watcher has suggested that escalating speculation that Ripple is about to partner with SWIFT and revolutionise the international money transfer market is premature.
According to blockchain journalist Anirudh VK at AMB Crypto, should such a partnership materialise, it would be a major game changer, providing Ripple access to all of SWIFT’s institutional clients in the finance and banking sector.
Speculation has intensified that a partnership is in the pipeline after Ripple announced that it would be participating in the forthcoming Sibos event in Sydney, which is dedicated to solving problems with global money transfer services (chiefly, slowness and high transaction fees). However, rumours of a Ripple-SWIFT deal had preceded this event, based chiefly on Ripple’s active policy of partnering with rival financial institutions it may in time replace. These rumours gathered momentum with recent news that Santander was partnering with SWIFT for a new Global Payments Initiatives program.
This prompted immediate speculation that the bank may use third-party liquidity providers to settle money transfer transactions across borders. Santander is already a member of the RippleNet network, using the xCurrent product to handle around 50% of its money transfer online transactions according to current estimates.
Anirudh concedes that the speculation isn’t entirely groundless; RippleNet has a range of solutions to provide liquidity between banks and last week included the following statement in its company blog: “RippleNet efficiently solves these liquidity pain points for financial providers and banks using flexible solutions that address various types of liquidity provisioning…RippleNet’s pathfinding capabilities, financial institutions can even link together multiple liquidity arraignments within the same transaction to optimize their transaction networks.”
This amounts to a significant step towards realising Ripple’s philosophy of partnering with banks, while SWIFT continues to serve them as a secure messaging system. However, the SWIFT network doesn’t have the capability of enabling instantaneous settlements between banks, chiefly because it depends upon prefunded liquidity relationships. Inevitably, these take a long time to settle, especially when there are liquidity problems.
By contrast, RippleNet’s liquidity solutions are more agile, relying not only on the conventional bank-to-fiat relationships (as on SWIFT’s network) but also using XRP as a bridge currency to transact payments and establishing third-party fiat relationships with banks to facilitate settlements in the more costly corridors.
By using the XRP-as-bridge-currency option, many banks and other financial institutions have been able to reduce fees by between 40 and 70% and achieve settlements within two minutes. It’s also able to reach into payment corridors involving more exotic currencies without requiring nostro accounts.
In addition, Ripple is now also deploying a feature called ‘pathfinding’ which is capable of linking multiple liquidity arrangements simultaneously.
Treating these developments as clues revealing a trajectory in the direction of a formal SWIFT-Ripple partnership is, Anirudh suggests, unsupported and even counteracted by other evidence. For example, Dilip Rao, Ripple’s Global Head of Infrastructure Innovation, last week responded to a question about the likelihood of such a scenario with these words: “Idle speculation. Cool your jets.”
He did, however, proceed to acknowledge that Ripple’s model could ultimately result in SWIFT’s demise, but for now “we are happy to coexist with the SWIFT world”.
Coexistence rather than revolution seems to be the true policy.
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