An update by the popular payment messaging system SWIFT to introduce blockchain into its process has brought out huge reactions from industry players. The proposed payment system was likened to failed companies like Kodak and Blockbuster by a software engineer, Vincent Van Code.
Is SWIFT Capable of Competing With Faster Blockchain Rails?
The controversy started with the renewed intention by SWIFT to add a blockchain-based ledger to its cross-border payment system. The company announced the ledger plans in September but provided limited details.
SWIFT positions the move as building “the digital payment stack of the future.” The company announced this would create a shared, real-time record of transactions.
But Van Code wasn’t impressed. He pointed out that SWIFT took five years just to decide to prototype the technology.
Hence, Van Code wrote “the Legacy system is dead, just like Kodak, Blockbuster and saddlers, all obsolete”. He doubted the timeframe for SWIFT to launch the system and its capability of competing with modern options.
The criticism points out the increasing gap in the finance sector. In contrast, the XRPL network is able to confirm transactions faster using RLUSD stablecoin.
The traditional infrastructure for SWIFT is far more time consuming. The process of integrating blockchain is happening at a time when institutions are experiencing growing pressure from customers in terms of time to settle payment.
Will SWIFT Be Able To Retain Clients When Faster Rails Are Available?
According to Van Code, the customers will abandon SWIFT the moment they find faster substitutes. He indicated that fast settlement at low costs is already offered by modern online banks.
He declared that big banks will have to meet the requirements of its clients regarding better service. This need is further shown by the fact that Ripple has received approval as a U.S. bank and it can become more open to blockchain payments.
The software engineer was skeptical about the 12 months SWIFT intends to implement its payment rails. The reaction of industry commentators regarding the announcement have varied.
According to Les Purves, tier-one banks already possess liquidity and global pathways. Purves also referenced Ripple saying that its success revolves around serving smaller banks that do not have similar resources as the big networks. He added that it is inevitable that all firms within the finance space will become adapted to blockchain technology.
Is The Ledger Offered By SWIFT A Blockchain?
Edward is another critic who voiced technical objections to the proposal of SWIFT. He argued that the post by SWIFT is purposefully vague and that its system is not what blockchain technology truly represent.
Rather, he defined it as a collective system that allowed payment status to be seen by banking institutions at the same time. Meanwhile, large institutions are launching stablecoins directly. An example is Sony Bank which stated that it will roll out a USD-pegged stablecoin in collaboration with Ripple and Circle next year.
Regulatory issues were also highlighted. According to one user, the situation with blockchain payment systems and its regulation in the United States was complicated during the previous administration.
