Ripple’s cross-border payment innovations challenge SWIFT dominance

Investment banking firm Houlihan Lokey has identified payments technology firm and XRP issuer Ripple as one of the potential challengers to the global banking messaging network Swift. In a market update report from April 2024, the firm mentioned Ripple and some fintech firms as competition to Swift in the cross-border payments category.

Although the report is already a few months old, popular XRP influencer WrathofKahneman recently highlighted it, noting that many of the fintechs listed as potential challengers also use Ripple technology or XRP. The highlight is even more significant given the recent in-principle approval of Ripple services by the Dubai Financial Services Authority (DFSA).

The Payments Market Update noted that the cross-border payments category will have a market size of $190 trillion annually in 2023, translating into $520 billion daily. It identified SWIFT Network as the biggest player in this category but identified several challenges, such as fragmentation, lack of interoperability, and high charges due to multiple middlemen.

Ripple could solve existing problems with cross-border payments

However, the report noted that blockchain technology could address issues plaguing cross-border transactions. Companies such as Ripple, Airwallex, Wise, Nium, and other banking networks are competing with SWIFT through this technology and other innovations.

It said:

“Blockchain technology provides quicker settlement times, lower expenses, and improved security, facilitating more cost-effective and efficient execution of international transactions.”

While the report did not dive deep into Ripple’s innovative cross-border payment solutions, the company has positioned itself as a payment technology company, attracting several partners from fintech companies and traditional financial institutions.

Ripple core service is a decentralized payment service known as Ripple Payments Direct (RPD), which enables partners to leverage Ripple blockchain technology to perform seamless cross-border transactions without needing to purchase XRP.

Some of the fintech companies mentioned in the report, Airwallex, and Nium, have already integrated Ripple technology for their cross-border payments services as far back as 2017 and 2020, respectively. More recently, financial institutions, including Pittsburg-based PNC Bank, have integrated Ripple technology.

Meanwhile, Ripple is not the only one tapping blockchain technology for cross-border payment solutions. SWIFT has also tested the use of blockchain technologies and recently disclosed that it is working on a solution to enable interoperability of blockchain rails and traditional financial institutions, allowing the use of regulated forms of money for transacting in tokenized assets.

Open interest in XRP reached $1 billion as the RLUSD launch gets nearer

Open interest in XRP futures reached $1 billion during the weekend, according to CoinGlass data, before declining to $845.57 million today. Open interest for derivatives usually signifies the flow of funds into the asset. An increase in XRP open interest highlights investors’ sentiments about Ripple due to developments within its ecosystem.

One of the crucial developments is the Ripple USD stablecoin RLUSD, which is currently in a private beta test stage. Its expected launch has attracted attention from many in the crypto community, particularly with recent mints suggesting that the firm might be planning to expand the scope of its tests.

However, Ripple has warned users to beware of scams, noting that it has yet to launch the stablecoin publicly as it has not received regulatory approval. Thus, it is not yet available for trading or purchase despite the several fake posts portraying otherwise.

Meanwhile, Ripple’s decision to wait for regulatory approval before launching RLUSD highlights how it seeks to build a regulatory-compliant image despite the US Securities and Exchange Commission (SEC) lawsuit and the lack of regulatory clarity in the US, where it is based. This enables it to appeal to institutional clients, which are its main targets

So far, the company has 55 licenses and approvals from regulatory authorities globally, with the Monetary Authority of Singapore (MAS), Central Bank of Ireland (CBI), and New York Department of Financial Services (NYDFS) among those that have approved its operations.