SWIFT: Is it Too Little Too Late or The Ultimate Crypto Killer?

The Advantage of Cryptocurrency

Many people believe that cryptocurrencies will eventually replace fiat currency as the medium for most financial transactions. This belief is founded in the idea that cryptocurrencies do a better job. But what that job is, and how well its done remains a point of contention.

Some people argue that it is more secure, others say it is too hard to use. A lot is said about the value of decentralisation, but few can point to a moment when it has helped them. And when it comes down to popular use, the strongest argument in favour of cryptocurrencies is their fast transaction speeds and low transaction costs, especially across borders.

Here Come The Banks
Since 1972 the SWIFT organisation has been providing messaging standards and services for the banking industry. When money is sent between financial institutions, the information required is typically sent through the SWIFT system. And the reason that transferring money between financial institutions has often taken a few days, is because this system, and the banks that cleared those transactions had no reason to develop faster methods.

It is impossible to know for certain if the competition posed by the growing popularity of cryptocurrencies was the cause, but recently SWIFT have been making some big changes to their services. After being engaged by New Payments Platform(NPP) in Australia, SWIFT developed a new and much faster messaging protocol. This new standard enabled financial transactions to be made instantly based on an email address or mobile phone number. NPP in association with the Australian banking industry rolled out this service in 2017.

Since then the European Union has engaged SWIFT in a similar project which will be based on the technology built for Australia. This system is designed to integrate the many payment systems in Europe and enable instant payments.

SWIFT Bank Transfers Take the Shine Off Cryptocurrencies
While cryptocurrency enthusiasts see lots of potential in blockchain technology, all the average consumer is looking for is a safe way to instantly pay for something or transfer money cheaply.

In the early days, bitcoin transactions were very fast and cost less than a few cents. But as trading volumes increased, the transaction fees increased and transaction times grew longer. Finally it got to a point where vendors stopped allowing bitcoin transactions due in part to the transaction speed and high cost. Many people were disappointed when the digital distribution platform Steam ended its support for Bitcoin in December 2017.

So while the advantages of security, a permanent ledger, distributed networks, and pseudo-anonymity will retain the core cryptocurrency supporters, slow transactions and high fees are pushing regular users away. And while many cryptocurrencies still offer very fast transactions and very low fees, issues of trust and the need to use exchanges to convert coins to the vendor's preferred coin are still a deterrent.

The Challenge For SWIFT
So while cryptocurrency's rise to world-wide usage is being hampered by transaction speeds and costs, SWIFT are moving to meet the customer need that cryptocurrency made evident. But there is no quick fix to the problem.

Banks have traditionally been slow to adopt new technologies and the vast number of systems and clearing houses involved in their network make implementing SWIFT's latest offering a difficult task. Even just the EU project is going to take 17 months from its announcement in June 2017 until its intended roll-out in November 2018.

Achieving its planned world-wide system of interconnected systems that enable instant payments may well be a few more years away. But how long will it take for a single, popular cryptocurrency to become the standard for fast everyday transactions at low cost? The race is on and there's a lot of money invested in both cryptocurrency and traditional banks that want it to go their way.

@timmarsh said in SWIFT: Is it Too Little Too Late or The Ultimate Crypto Killer?:

This new standard enabled financial transactions to be made instantly based on an email address or mobile phone number.

Is anyone using this yet? That's pretty cool, but still, you can always reverse the funds; also there's probably still high fees. I'd rather just use a cryptocurrency personally.

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@admin Yes, all the major banks and many of the smaller ones, so it is available to most Australians.

"While today's launch of the New Payments Platform is the result of unprecedented collaboration between 13 members of Australia's financial services industry, including Australia's four major banks and the Reserve Bank of Australia, a large number of additional financial institutions will also connect to the infrastructure through one of the initial participants." NPPA

Yes, I imagine payments are still reversible, but I'm not sure where public sentiment lies on that issue.

Fees are up to the institutions that are implementing it, but everywhere I've seen it in a FAQ, there are no fees for using it. That is definitely not typical for Australian banks and even more reason to think it is a move against cryptocurrency.

Chris Skinner said: "to say that a new technology, the blockchain, could eradicate a 50-year-old, bank-owned network overnight is provocative."

I would imagine that at some point, given the power of the blockchain, at some point will become complementary to Swift. But to think that that would happen within the next five years hinges around the 'provocative'.

Both technologies have inherent advantages. While SWIFT is tested and trusted, it is still the wild-wild-west when it comes to the blockchain. Because a new technology promises to do something that an existing technology already does quite well, albeit, with some challenges, does not mean it would suddenly be disposed of.

For cryptocurrency to supplant Swift as the world's clearinghouse, the issue of regulatory frameworks has to be addressed. Some lacking points in cryptocurrency such as insecurity, high energy consumption, and impact on the environment; uncertain about the technology's fidelity at scale, e.t.c.

These are exciting times and most changes to established ways of doing things take some time.

That is great news and might bring down the growth of cryptcurrencies to quite an extent. If the people are able to make faster transactions based on traditional methods then I can see a lot of people sticking to the means that they are already familiar with. But on the other hand cryptocurrencies come with way too many advantages and might have spoilt the people for good. Also, there is always the chances of funds being reversed which might still be a huge con.