Swift is connecting its global payments innovation (gpi) service for cross-border payments with blockchain-based platforms in a new proof of concept launched with R3.
The PoC will trial gpi Link, a “gateway” to connect e-commerce and trading platforms with Swift’s gpi. The first stage of the PoC will be carried out on R3’s blockchain platform, Corda. Corporates using Corda will be able to authorise payments from their banks via gpi Link gpi payments will then be settled by the corporates’ banks and the resulting credit confirmations will be reported back to the blockchain platforms via gpi Link on completion. While the PoC initially addresses R3’s blockchain-based trade environment, it will be extended to support other blockchain and distributed ledger technology (DLT) platforms, non-DLT and e-commerce trade platforms.
“Following the recent launch of our Corda Settler, allowing for the payment of obligations raised on the Corda platform, it was a logical extension to plug into Swift gpi,” says David Rutter, CEO of R3. “All the blockchain applications running on Corda will thus benefit from the fast, secure and transparent settlement provided through the Swift gpi banks.”
According to Swift, the PoC addresses the need for blockchain-based commerce to be supported by settlement using fiat currencies. Blockchain rival Ripple’s xRapid, a cryptocurrency-driven solution for cross-border payments, has seen resistance to adoption by banks because it uses XRP, which like other cryptocurrencies is extremely volatile. However, Ripple insists that users are not exposed to this volatility because they only hold the XRP for less than a minute, if not seconds.
“While DLT-enabled trade is taking off, there is still little appetite for settlement in cryptocurrencies and a pressing need for fast and safe settlement in fiat currencies,” says Luc Meurant, Swift’s chief marketing officer. “With gpi Link, banks will be able to provide rapid, transparent settlement services to e-commerce and trading platforms, opening up whole new ecosystems to the speed, security, ubiquity and transparency of gpi and enabling them to grow and prosper in the new digital economy.”
Swift has come under pressure in recent years from fintech startups, particularly those using blockchain, moving into the payments space, and this latest move appears to demonstrate a softening of Swift’s stance towards the technology. In late 2017, Swift seemed to have ditched blockchain entirely following a PoC it carried out on Hyperledger Fabric, concluding that there was some way to go before the technology would be entirely suited to the purpose. Since then, it has been focused instead on building on its existing rails with the gpi service.
According to the latest figures from Swift, gpi now accounts for 55% of cross-border payment instructions carried on the network, and is used to send over US$300bn in payments every day. But the service is not without its critics: Ripple’s director of joint venture partnership, Emi Yoshikawa, claimed last year that gpi cannot compete with the fintech company’s “near real-time” settlements using blockchain because it uses “very old architecture” – a claim that is not addressed by the gpi Link PoC, which only provides an interface between the two technologies.
The new PoC will include as-yet unnamed bank and corporate participants, and a prototype will be demonstrated at Sibos in London in September this year.