Journalist
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Key Takeaways
What’s the SWIFT cross-border payment plan?
It’s piloting an ‘open network’ to advance fast, instant payment with ‘no hidden fees.’
How will it achieve its plan?
SWIFT has reportedly reached out to Ethereum L2 Linea, for faster on-chain messaging.
Stablecoins have made the cross-border payment segment very competitive, and old guards like SWIFT aren’t sitting pretty as disruption comes their way.
SWIFT, the global messaging network for banks, is exploring instant cross-border payments with ‘no hidden’ fees, including blockchain-based options.
According to a report by media The Big Whale, SWIFT is exploring migrating its messaging system to on-chain on Linea [LINEA], an Ethereum [ETH] L2 built by Consensys.
One of the insiders of the banks participating in the project said,
“The project will take several months to materialize, but it promises an important technological transformation for the international interbank payments industry.”
SWIFT’s adaptation plans
SWIFT handles financial messaging for over 11,000 international partner banks.
But the system is complex and weighed down by compliance and last-mile issues. It can take several days and come with a hefty cost for retail remittances via the network in some corridors.
In contrast, sending massive amounts via stablecoin and on-chain rails could cost a penny.
In fact, most payment aggregators have reported massive growth in stablecoins as the preferred choice for cross-border settlements.
Now, other old players like MoneyGram have jumped on the bandwagon to support stablecoins. And SWIFT is watching the shift closely.
The messaging giant found that about 80% of its network delay happens on the ‘last mile.’ To address this, SWIFT is piloting a new network with 17 banks, including BNY Mellon and Wells Fargo.
The new ‘open network’ is expected to have ‘no hidden fees’ and instant domestic settlement if possible.
Thierry Chilosi, Chief Business Officer at SWIFT, added that the move will ‘elevate customer experience.”
“At Swift, we are committed to being an open network and doing all that we can to elevate the end customer experience right across the ecosystem.”
This could be the network likely being explored via Linea, and by extension, could be positive for Ethereum [ETH].
So, where does that leave Ripple [XRP], which has positioned itself as a SWIFT disruptor? In fact, Ripple CEO Brad Garlinghouse recently said they could handle 14% of SWIFT volumes by 2030.
Currently, SWIFT handles over 40 million daily messages, or an average of 450 TPS (transactions per second). XRP Ledger can handle thrice the capacity with an average of 1,500 TPS alongside on-chain payments.
However, SWIFT has strong network effects with over 11,000 partner banks across over 200 countries. Ripple does not have such a global reach yet.