This apparent fight or flight response to the growing ubiquity of blockchain can be „Too little, too late“.
SWIFT, the Brussels-based interbank cooperative, has launched its first active cross-border instant payment connection, a move that could have major implications for the global payments landscape.
The cooperative announced on Thursday that the UK-based Lloyds Banking Group has become the first to connect to SWIFT gpi Instant, the high-speed cross-border facility that settles payments in seconds. The payment system connects SWIFT gpi to the UK’s fastest payment infrastructure, enabling Bitcoin News Trader customers to send cross-border payments 24 hours a day, seven days a week.
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According to SWIFT, the new system:
„(…) allows banks to use existing infrastructure to provide better service 24 hours a day, 7 days a week, with faster speeds, clarity on fees and, most importantly, predictability on when a final beneficiary’s account will be credited.
SWIFT, which stands for Society for Worldwide Interbank Financial Telecommunication, has become the global standard for secure international payments and trade finance. But the network has been criticised for its costly and time-consuming inefficiencies.
SWIFT’s global payments innovation, or gpi, grew out of these criticisms. Launched in 2017, the gpi improved payment tracking and fee transparency in more than 1,100 domestic brokers.
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Despite these improvements, SWIFT’s innovations may not be happening fast enough. As noted by the Financial Times in December 2018, SWIFT’s emerging competitors are not limited only to new companies such as TransferWise and Revolut, but also to major financial institutions that are taking advantage of blockchain technology.
Led by JPMorgan, the Interbank Information Network is a blockchain consortium that uses distributed registration technology to improve compliance and reduce processing delays. The Network, which includes over 130 banking partners, has been renamed Liink and is based on the Onyx blockchain.
Blockchain technology has been cited as a major disruptive force in the global payments landscape. Unlike SWIFT, blockchain allows for cross-border transfers in a decentralised manner, which means that payments are approved directly.
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Ripple is perhaps the most famous example of a global remittance system based on blockchain. RippleNet’s decentralised infrastructure has a 3-second payment processing time and a 0% failure rate for its messaging system.
The use of SWIFT as a weapon through the aggressive use of sanctions has also forced certain countries to move towards blockchain. Turkey, Venezuela, Iran and Russia have experimented with blockchain platforms to create parallel financial systems.