Ripple and Swift are not competitors, but “can be very complementary”, according to Ripple’s head of global banking Marjan Delatinne.
Speaking to GTR in an on-stage interview at the Blockchain Summit in London last week, Delatinne, who has previously worked for Swift, was asked whether she considers Ripple a competitor to the decades-old payments network.
“We are two different things. We are not replacing Swift, as Swift has its own value,” she answered, adding that banks could “take advantage of both”.
Delatinne joined the blockchain company in 2017, having worked at Swift for 10 years, most recently in charge of selling its global payments innovation (gpi) service.
The gpi is Swift’s attempt to innovate its offering in light of the rise of blockchain-based rivals. The initiative was first announced in 2015 and went live two years later, promising faster settlement times and an ability to track payments. According to Swift, on average, half of gpi payments are credited to end beneficiaries within 30 minutes, and almost all within 24 hours – down from what could take days with Swift’s previous solution.
Ripple has previous dismissed this upgrade as “just a marginal improvement” on “very old architecture”.
But Delatinne offered a more diplomatic assessment of her former employer, saying that the gpi “is bringing a value”, although emphasising that there are some challenges the gpi does not address.
“Swift is improving dramatically the way that the payments happen today, but it’s still about the messaging,” she said. “You still send a message to another party. I don’t call it settlement, because this is not settlement, it’s around the fact that I can send a message in a faster way, and I can track it. This is an improvement from previously, where it could take days.”
Swift was founded in 1973 and today has more than 10,000 bank members. As a messaging system, it is used to send payment orders. The actual transfer of funds is typically made from a pre-funded nostro account that a bank has with a local correspondent bank.
Ripple is attempting to change this way of conducting cross-border payments, using blockchain and cryptocurrency technology. Its most recent product, xRapid, helps banks source on-demand liquidity in a foreign country when facilitating a cross-border payment, without requiring them to have correspondent relations. It does so by using XRP, a cryptocurrency created by Ripple, as a ‘bridge’ between fiat currencies.
Using xRapid, a US bank, for example, transfers dollars into XRP via an exchange, and sends the XRP to an exchange in, say, Mexico. On the other end, the XRP is then converted into pesos. It all happens within minutes and at a lower cost than traditional methods, which typically see similar transfers take days, incur high foreign exchange fees and also require banks to hold capital in nostro accounts.
“Today trillions of dollars are tied up in pre-funded accounts around the world by banks in order to make sure that the exchange of value in the correspondent banking system is happening. But it’s at a cost: working capital for corporates is locked up,” Delatinne said. “xRapid is helping users to have fast and low-cost provision of liquidity when they need it, without the obligation of tying up capital in advance.”
Ripple made xRapid commercially available in October. According to Delatinne, the product is now used by more than 20 financial institutions. (This is compared to the approximately 200 users of its first product, xCurrent. While xCurrent is also based on blockchain technology, it is, like Swift, a payment messaging system only.)
Selling a cryptocurrency-driven solution to banks doesn’t come without its challenges, Delatinne noted.
“We are obviously in an education phase. When talking with banks, we still have to ensure that they understand that using this product is not around keeping XRP on their balance sheets. That’s very important for the banks to understand, because they would otherwise have to report that to the regulators,” she said, emphasising that financial institutions do not hold XRP, but only use it only as a bridge currency.
Delatinne also commented on Facebook’s announcement on June 18 to launch Libra, a digital currency that will allow its billions of users to make financial transactions across the globe.
“Obviously I think it is great news that a company like Facebook enters this space. JP Morgan did a couple of months ago. All of this brings more credibility to this space. So the more names, the better. For us, it’s just a validation of what we have been saying for seven years,” she said.
She highlighted that Facebook’s business model is different from that of Ripple.
“What we see is that their approach is not necessarily that they are going to work with the financial system – they want to completely transform it and bring a completely different experience,” she said. “Our approach is different: we are working with the system, so we haven’t been disrupting only. We are happily working with the banks, the payment service providers and the regulators.”
Read the interview here.