The current infrastructure of cross border payments is slow, complicated and goes through many banks in between. A key player in the international payments market right now is SWIFT connecting over 11500 banks worldwide handling $5 trillion in daily payments. SWIFT sends payment instructions between banks, whereas the handling of the money happens with banks holding foreign currencies in multiple countries. For example if a Dutch bank wants to do business they open an account at an U.S bank so they can store their money in the American dollar valuta so that they can pre-fund transactions. The moving of money often involves a lot of middle banks as the banks holding foreign currencies (direct accounts) are often not banks where the money needs to be transferred to. The other disadvantage of this system is that much money is tied up in these accounts on which otherwise could be invested or made interests on. Lastly, transaction fees for SWIFT cost around $10 to $50 dollar per transaction and take about 30 minutes to 24 hours (used to be 3-5 days) due to human checks for compliance, anti-fraud and account matching. Moreover they only operate in business hours. In short, central banks settling transactions takes time (Johnson, 2025).
As discussed in class web 3.0 offers the opportunity for decentralized data architecture through blockchain technology taking banks out of the equation when it comes to transation handling. Ripple offers a gateway for decentralized international payment transactions between banks through its distributed ledger technology (DLT). The value that is transferred is in the form of a token called XRP where consensus and cryptography replace manual checks. Banks can join their payment network called RippleNet to transfer money directly to each other without middle men. Dollars are converted into XRP, sent across the globe through its DLT and converted into another currency on the other end. The disadvantages mentioned before are all vanished, it happens within a single transaction within 3 to 5 seconds without the need to hold money at other banks with a transaction fee a barely nothing (Johnson, 2025).
Why XRP rather than bitcoin?
Where the XRP ledger differs from the bitcoin blockchain is its capacity to process 1500 transactions per second compared to bitcoin’s seven. It does not use energy intensive mining like Bitcoin but relies on a consensus protocol verified by a group of independent validators distributed across the globe (Johnson, 2025). For that reason the transaction speed of the XRP ledger is 3 to 5 seconds whereas Bitcoin’s is about 10 minutes (CoinMarketCap, 2021). This all makes it much more scalable and sustainable to the mass of transactions done by banks.
What are the challenges?
With many banks already adopting the XRP ledger how likely is it that XRP ledger fully replaces SWIFT? For that there are some challenges. Lack of clear rules makes big banks hesistant. Swift, major banks, and regulators may resist losing control over entrenched interests, jobs and national infrastructures . XRP’s price volatility (cryptotrading is sensitive to whales) worries risk averse institutions. Countries may fear losing monetort surveillance, sanctions enforcement or capital controls. Lastly, central banks are developing their own digital currencies (CBDC) which they may prefer over XRP for cross border payments (Johnson, 2025).
Ripple is trying to become more than a payments company, they are trying to operate like a full bank. But for that it needs to have a lot of capital, a detailed business plan, strong rules to prevent money laundering and good cybersecurity and risk management (Johnson, 2025).
My question to you as the reader is how likely do you think that XRP ledger (or another similar blockchain technology) will replace SWIFT and would you invest in it yourself why or why not? And if they could become a bank how would you foresee an integration in traditional bank services (think about tokenized assets services, smart contracts and CBDC interoperability)
Reference list:
CoinMarketCap. (2021, September 7). How long does a bitcoin transaction take? CoinMarketCap Academy. https://coinmarketcap.com/academy/article/how-long-does-a-bitcoin-transaction-take
Johnson, I. (2025). How Ripple (XRP) Is Building a Bridge to the Future of Cross-Border Transactions: Digital assets and their infrastructure present alternatives to existing financial intermediaries. How should planners evaluate their investment opportunities in an increasingly globalized world?. Journal of Financial Planning, 38(9).
