In a major new development for the blockchainization of traditional finance, the global payment network system SWIFT – among the most used but most outdated payment systems in the world – is now experimenting with migrating their messaging system onto the blockchain. According to reports, the migration would be to an Ethereum Layer 2 blockchain.
As reported by the Block:
“The [experimental] project will take several months to materialize, but it promises an important technological transformation for the international interbank payments industry.”
This latest move by SWIFT shows that the payment system used by over 11,500 financial institutions across the globe is taking action on the Kodak Moment affecting the banking industry: either adapt to disruptive technology, or die in the likes of Kodak.
This move also comes as cryptocurrency cross-border payments systems are gaining rapid traction in a debanking revolution that is unfolding with the speed, efficiency and low transfer costs of cryptocurrencies. XRP Ledger, for example – the blockchain governed by the XRP cryptocurrency, offers real time cross-border payments settlement for pennies. The blockchain believes it can capture 14% of SWIFT’s volume over the next five years, driven by a focus on liquidity rather than messaging infrastructure, and real time settlement with minimal fees. Other blockchains such as Solana and Ethereum offer similar infrastructure as XRP Ledger for cross-border payments.
Meanwhile – as we reported last week – even popular texting apps such as LINE are venturing into the cross-border payments sector via cryptocurrency. A stablecoin super app set to deploy will allow users to send and receive cross-border payments via messages, and make online and in-store payments worldwide. This app is popular in Asia and has some 178 million monthly users.
As for SWIFT – which currently uses technology from the 1960s – it can only hope it is not doing too little too late. As seen in previous periods of disruptive tech transformations, speed and scale is of essence.