SWIFT, a global system for cross border payments stated that Blockchain does not fix delays in payments made between international banks. Also, legal and regulatory requirements, as well as the inability to keep the amount held by banks private, were pointed out as some of the major factors that could make financial institutions reluctant to adopt Blockchain, reports American Banker.
Ripple and SWIFT, Two Rivals Facilitate Cross Border Payments
Ripple and SWIFT have been known to be rivals when it comes to sending payments between banks in different countries. While SWIFT’s system has been in operation much longer, Brad Garlinghouse, Ripple’s CEO is positive that its Blockchain Technology can outperform SWIFT’s payment service.
However, SWIFT is confident about its new global payments innovation (GPI) system. Reportedly, GPI has been adopted by 450 banks, and it has a daily settlement volume of $300 billion. Also, 80 percent of international payments are made with the GPI. It accounts for 50 percent and 40 percent of the payments that were credited within 30 minutes and 5 minutes respectively.
GPI is Fast Even Though it Wasn’t Intended to be Speedy
Likewise, GPI has been noted to be fast even though it has been outlined that its aim is not to speed up transactions. Manish Kohli, global head of payments and receivables at Citi who spoke with the media stated that what he looks out for in international payments is “cost, speed, transparency, convenience, and security”. He adds that banks also agree that GPI has helped in all five areas.
In the area of transparency, a bank sending money to a financial institution in another country can see how the money moves from an intermediate bank to the other, before it gets to the intended recipient. Here, Kohli said it makes it possible to see the fee that is charged by each bank as it moves along the chain and even addresses issues if any occur.
Blockchain May Not Really be What Banks Need
Blockchain in SWIFT’s opinion, may not be really what these banks are looking for. According to them, banks do not want their competitors to know how much they are holding which is inevitable with Blockchain. In the same vein, the DLT has legal and regulatory requirements such as Know-Your-Customer (KYC). Thus, a bank must have a mutual KYC relationship with another bank before being able to send payments to them.
Therefore, SWIFT believes that neither Blockchain nor companies that use this technology can be a threat to them. The platform also said that currently, they do not see how the use of Blockchain will improve the level of service offered to their customers over the use of the GPI. BTCNN on January 30 also informed of SWIFT’s collaboration with R3 Blockchain to launch a payment gateway.