Created in 1973, the Society for Worldwide Interbank Financial Telecommunication (Swift) developed a secure network to send and receive information about financial transactions. Today it’s used by more than 11,000 financial institutions in 212 different countries. More than $5 trillion go through Swift’s network every day. As you can expect, several projects and companies around the world are trying to unseat Swift. With cryptocurrencies and specifically stablecoins, Swift has faced some initial competition that will only get intense as they mature. A couple days ago, Bank Frick, a European bank, said buy-buy to Swift. The bank in Liechtenstein will now use the USDC stablecoin, to power cross-border transactions. Cryptocurrencies and peer-to-peer banking offer fast alternatives to the Swift network, and could help build a world currency unfettered by cross-border barriers.
Swift is currently the primary service provider when it comes to cross-border payments, remittances, clearing and settlement. It has a monopoly. If a bank needs to carry out cross-border business, the principal requirement is to access the Swift network, or to find another bank that’s already connected.
International transfers are slow, expensive and uncertain. The actual movement of money takes a few days. There is a complex rebate system among banks, and senders don’t know exactly how much the receivers will get, as the banks take a cut. Undoubtedly, Swift has improved its entire payment and settlement system over time, through numerous initiatives, including the innovative global payment initiative (GPI).
Bank Frick added support for the USDC stablecoin, allowing its clients to deposit, as well as buy and sell, USDC using their bank. By adding USDC, the bank will enable customers to process USD payments quickly, compared to the traditional payment rails using Swift. Since its founding in 1998, Bank Frick has revamped into one of Europe’s preeminent blockchain banks, offering crypto trading and custody for institutional clients miners and mining firms. The bank ventured into the crypto space in 2018.
Coinbase and Circle launched USDC in late 2018. The coin is designed to be pegged to the US dollar, which gives banks an opportunity to capitalize on both the transfer speed of digital assets and the reliability of USD. Since the start of the year, USDC has added over $230 million to its market cap, bringing it to around $750 million.
The payments industry has now began to realize that stablecoins offer a way to rethink existing business models, services and even the nature of money itself.
At this time, stablecoins are the fastest growing segment of crypto, surpassing $11 billion in market cap, doubling in size since the beginning of the year. In just two months, stablecoin assets in circulation grew by 70%.
Stablecoins may sound like something simple, I mean they’re just digital versions of the dollar, yet they represent a massive opportunity. They offer a huge improvement, orders of magnitude better than existing systems, when it comes to moving dollars versus using a bank. They’re cost effective and fast, as transactions are settled in minutes, instead of days. While trading has been the primary driver for their growth so far, their future will be driven by the superior user experience they offer.
They will be become the defacto cryptocurrency on ramps and off ramps. A January, 2020, survey by Bank for International Settlements showed that over 80 countries were working on CBDCs. Banque de France will begin interviewing applicants to work with it on experiments in the use of a digital euro in interbank settlements. These experiments will also explore integrating central bank digital currency (CBDC) into the clearing and settlement of tokenized financial assets.
Libra recently pivoted away from it’s own currency, to a series of single-currency stablecoins, each tied to a different fiat currency. Libra won’t be pegged just to the USD, rather it will be pegged across many of the world’s significant currencies. We’ll see dramatic improvements in the on-ramps and off-ramps for cryptocurrency and Libra will likely emerge as a major player in the space.
The advantages of using the stablecoins compared with the established payment systems can be reduced to a few simple points. When you look at SWIFT from the banking and financial institutions’ perspective the argument for continuing to use them is based on a “better the devil you know” way of thinking and a prevailing conservatism in the financial world.
The rivalry between the old and the new is just getting started and it will decide how cross-border payments will be handled for decades to come.
While stablecoins first originated in the world of cryptocurrencies, they have now become an independent concept of their own. They are a moving target with tremendous potential to fundamentally change the financial system. It remains to be seen whether stablecoins are going to coexist, complement, or takeover existing payments.
Given the antiquity of SWIFT and the lack of access to traditional institutions in many developing countries, there is a possibility that stablecoins could just become the first blockchain product that’s actually used by a large number of people. Truth be told, stablecoins are faster, cheaper and more reliable than Swift. The only problem they have is that they’re not yet been widely adopted.
But it’s safe to say that the revolution is already in progress, and in the years to come, the market for digital dollars will grow exponentially, as more regulated entities like Bank Frick will start to adopt stablecoins.
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Westpac rolls out customer complaint resolution system
Australian bank Westpac has enlisted IBM to help build a complaint resolution platform that is now being rolled out to more than 15,000 customer-facing employees.
In a pilot phase since July, Resolve will now be accessible to 15,000 staffers via an “intuitive” system making it simpler for branch and contact centre staff to log and resolve complaints, says Westpac.
From next year, customers will have direct access via online banking, enabling them to log and track their complaint as it progresses to resolution. Over time, the bank says AI will help navigate bankers or customers through “guided resolutions”.
Lisa Pogonoski, GM, customer solutions, Westpac, says: “This is a huge opportunity to significantly improve customers’ experiences, get all of our people onto the same system, have one single view of complaints and one source of data.”
Post Office to close 600 ATMs
The UK’s Post Office is set to shut 600 of its 2000 ATMs over the next 18 months as it takes ownership of a network of machines currently operated by Bank of Ireland.
In response, the Post Office has joined the Link network and promised to invest £16 million over four years to maintain the network of free to use machines.
However, it will only operate 1400 commercially viable ATMs once the transfer is complete in March 2022. It will also keep almost 60 low transacting ATMs at locations where the next free to access ATM is a significant distance away.
By mid-2023, all 1400 ATMs will be replaced with new devices, with Cennox contracted for its software solution and managed services. Post Office will also use Vocalink to provide the transaction processing services for Link, Visa, MasterCard and Post Office Card Account transactions.
At sites where there is no longer an ATM, the Post Office says people can get cash over the counter.
Martin Kearsley, banking director, Post Office, says: “In the areas where we have been unable to sustainably operate the existing ATMs, customers can still withdraw cash over the counter free of charge and in a secure manner. Many of our branches are open long hours and at weekends, ensuring continued access to cash.”
The UK’s 2019 Access to Cash Review found that 17% of the UK population rely on cash, with vulnerable communities, including the poor and those in rural areas, at particular risk from reduced access to cash. The Covid-19 pandemic has further heightened the problem, with many high street businesses spurning cash payments in favour of contactless transactions.
Ant Group sets IPO pricing
Chinese fintech giant Ant Group has set the price for its upcoming initial public offering, which is expected to raise a record $34 billion.
Meanwhile, the price for the Hong Kong part of the listing is expected to revealed later in the week ahead of the listing early next month.
“This was the first time such a big listing, the largest in human history, was priced outside New York City,” Ma said at the Bund Summit. “We wouldn’t have dared to think about it five years, or even three years ago.”
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