What the HSBC news means for the SWIFT vs Ripple debate

Originally appeared on bobsguide.

SWIFT announced this week that HSBC has joined SWIFT global payments innovation (gpi), joining 50 banks that are already live from 150 that are committed to the gpi project.

Hailed as a “game-changer” by Lars Sjögren, global head of transaction banking at Danske Bank, the development comes at a time when correspondent banking is seeing something of a reshuffle as cross-border payment fintechs go commercial and challenge the incumbent heavyweight, SWIFT.

And that sentiment is now being expressed by Tom Halpin, Global Head of Payment Products, Global Liquidity & Cash Management at HSBC, who commented: “We are always looking to offer our clients the benefits of increased speed, transparency, security and traceability which have become vital requirements for any business that relies on making or receiving international payments. We remain committed to exceptional client service in the payments space.”

But Ripple, leveraging blockchain in cross-border payments, featured in both bobsguide’s top 8 disruptors and blockchain categories as one to watch for 2018, and for good reason. By offering quicker settlements executed on their supervised distributed ledgers, Ripple can offer cross-border payments in seconds.

Despite its infancy, Ripple’s list of partners grows as LianLian, MoneyGram as well as the UAE exchange, the Saudi Arabian Monetary Authority join early investors Santander and Standard Chartered, as well many other Tier 1 banks, it strongly suggests this is a startup keen to expand and challenge with agile disruption.

But SWIFT is certainly not out for the count when it comes to being a frontrunner.

“We have a history of innovation,” says Harry Newman, Head of Banking at SWIFT, speaking to bobsguide, pointing out that the firm still held the biggest trump with their decades long established collaboration with the world’s largest network of banks, and places the underdog tag firmly on Ripple.

“The SWIFT model has proven itself over several decades and acted as the cornerstone of cross-border correspondent banking” and how their constant attitude to self-disruption is evident, “we continue to meet our clients’ evolving requirements. SWIFT gpi is a continuation of this collaboration and has been a tremendous success.” said Newman, reiterating the proven importance of constant adaptation to the ever changing ecosystem since SWIFT’s launch in 1977.

Indeed, Newman goes one step further to emphasise how the “SWIFT gpi also improves many of the key areas of correspondent banking by reducing problems and speeding up the payments process. For example, banks receive fewer queries and have told us their enquiry-related costs are reduced by as much as 50% when they use SWIFT gpi.”

But corporate customers have been skeptical – particularly those from the panel Q&As at Sibos 2017 – of the supposed benefits of the gpi tracker, something which Newman acknowledges: “corporate customers have come to expect greater transparency in the payment process.”

On the one hand, SWIFT gpi is addressing a known pain point of many treasurers, with the aim of providing customer satisfaction. Ripple, as well as other fintechs, can apply pressure but whether they can challenge the incumbent remains to be seen.

“While there are a number of different payment providers, many of these companies tend to specialise on one or two of these factors, while lacking in other areas,” says Newman.

It suggests that for all the attention Ripple and other fintechs in the space have received in recent months, SWIFT’s all-rounded end-to-end service remains dominant with gpi due to secure that for some time with Newman promising a strategy of adoption and expansion for gpi.

Related reading

Finance more evolution than revolutionary change