SWIFT – Society for Worldwide Interbank Financial Telecommunication has been projecting itself as a key player in global payment networks for decades. However, Ripple’s XRP – the leading cross-border payment networks designed specially to transfer money internationally quickly and safely. Currently, XRP is striving to modernize the SWIFT network by enhancing or replacing certain attributes. Here’s how XRP fits into the modernization of SWIT. Let’s dive in to gain more valuable knowledge about them in depth.
Speed Settlement
SWIFT Limitations: SWIFT network is considerably a reliable one but it is notorious for slow transactions. Especially for cross-border payments, SWIFT might take 1 to 3 days to confirm a transaction. This is because the payments are made in different time zones by multiple intermediaries. This delay might be a problematic thing for many businesses and individuals who seek quick access to their funds.
XRP’s Quick Access: Unlike SWIFT, XRP offers instant settlement within 3 to 5 seconds. This is because Ripple’s RippleNet is used to bridge the currencies for transactions and reduces the time it takes while making cross-border payments.
Cost Efficiency
SWIFT Cost: One of the main issues SWIFT users have been facing is transaction cost. In SWIFT Network, cross-border payments usually involve multiple intermediaries like banks and payment providers. Hence, for each transaction, SWIFT charges high transaction fees as its handling fee. In the current finance market, SWIFT charges from $20 to $50, depending on the amount being initiated by the senders.
XRP’s Cost: Ripple’s XRP has gained more traction among financial institutions due to its low-cost efficiency. In comparison with the SWIFT Network, XRP’s cross-border payments charge a fraction of a cent per transaction.
Transparency and Security
SWIFT Security: SWIFT Network has established security protocols but it relies on centralized systems. Hence, financial institutions are wondering whether it could breach security attacks like hacking, and more. Also, many users are criticizing its transparency as it delays in tracking payments that are made through SWIFT.
XRP’s Transparency: Ripple’s XRP employs XRP Ledger on its blockchain. It is the consensus algorithm of XRP which affords transparent, decentralized and more securable transactions across the globe.
Liquidity
SWIFT Liquidity Challenge: One of the challenges that the SWIFT network faces with international payments is liquidity. This is because SWIFT requires different banks to hold pre-funded accounts in multiple currencies to settle transactions worldwide.
XRP’s Liquidity: XRP network acts as a bridge currency in cross-border payments. Hence, it doesn’t require any pre-funded accounts to make international transactions.
Interoperability
SWIFT Limitation: SWIFT might have been designed for global payments. But it does not offer smooth interoperability for digital finances like blockchain systems or cryptocurrencies.
XRP’s Interoperability: XRP Consensus of Ripple’s XRP is designed to be more interoperable with the existing financial networks including SWIFT. This means that XRP can facilitate faster and low-cost transactions between financial institutions and different payment networks.
RippleNet and SWIFT GPI
SWIFT GPI: Few years back, SWIFT introduced SWIFT GPI, aiming to address the challenges that users face with cross-border payments. With the help of GPI, SWIFT improvised its transparency, tracking features, and more. However, the SWIFT network is still not efficient.
RippleNet: RippleNet does ot seek to replace SWIFT completely. Instead, XRP has partnered with several financial institutions to enhance the efficiency in existing payment networks.
Final Thoughts
Ripple’s XRP is the key revolutionizer in moderining the cross-border payments. This is because XRP offers advantages like speedy and cost-effective transactions with high liquidity. However, it doesn’t mean that XRP will completely replace SWIFT. XRP acts as a key player by enhancing the above-detailed aspects.
