For its first four years, Ripple (XRP) was unknown to most people. However, its remarkable rise to the top through an unbelievable price increase of over 30,000% in the year 2017 made it the cryptocurrency project everyone was talking about. Having at one point outdone Ethereum to become the second most valuable cryptocurrency in the market, there was no avoiding Ripple. Its time had come.
One of the factors behind its meteoric rise to the top was the enlisting of 100+ banks to the RippleNet platform. RippleNet enables banks and other financial institutions to transfer funds in seconds and at very low prices. The platform became a favorite for many banks which enlisted and started testing this new and transformative blockchain-powered platform. However, in doing so, Ripple was directly taking the battle to the SWIFT system which has been in operation for close to five decades.
SWIFT is a messaging network that banks use for global payments. It facilitates the secure transmission of instructions through a standardized system of codes. Banks have used SWIFT for so long that most people didn’t think there was any other way you could securely transfer funds from one part of the world to the other.
SWIFT averages 3-5 days delivery time, an awfully long time in the information age. With globalization being a driving factor for most economies, the swift movement of funds from one region to another is no longer a luxury but a necessity. The fees charged in the SWIFT process are also quite high and to top it all off, there is an error rate of around 5%.
Ripple provided banks with a faster, traceable and cost effective funds transfer protocol and banks signed up in droves to take advantage of the revolutionary technology. Money could now be sent from one continent to another in just four seconds.
In response to the threat in its market dominance, SWIFT launched its Global Payments Innovation Initiative (GPII). GPII is a new set of rules and practices being enforced by SWIFT which prohibit member banks from the delayed remittance of funds, high charges and opaque processes. GPII is supported by payment tracking to ensure that the banks adhere to these new rules.
While GPII is certainly a welcome gesture from SWIFT, the blockchain is a more advanced technology whose benefits exceed just a commitment by banks to “do better”. Ripple’s blockchain platform facilitates transfers in just four seconds compared to the GPII which will take at least a day. The transaction fees are also negligible for Ripple while the banks will continue to levy much higher charges even after instituting the GPII rules.
The battle lines are drawn and the battle is just getting started.