George Harrap, CEO and Co-founder of Hong-Kong based blockchain remittance startup, Bitspark, has outed SWIFT for hampering fintech from driving innovation in the money transfer sector in his new e-book

He argues that the remittance sector is ripe for disruption. However, while many tech players are coming up with novel business models and digital solutions to bring prices down and improve efficiency, these players remain at an unfavorable position for not being part of the SWIFT network.

“Processing a money transfer should not have to take 1-5 business days in this day and age. Many fintechs are working to change this but remain at a disadvantage because they are outside of the elite tier of correspondent banks in the SWIFT network,” says Harrap. “[They] are limited to who [they] can interact with, and are subject to the correspondent’s terms and fees as well as potential delays in payment processing. […] This needs to change and blockchain-based payment protocols can offer a viable solution.”

SWIFT, a cooperative society, was created in 1973 to establish common processes and standards for financial transactions, and facilitate settlement between banks.

The system allows banks around the world to exchange information and data about payments and is used by more than 10,000 financial institutions in 212 different countries.

Previously, an alternative to SWIFT did not exist but now with the advent of blockchain and distributed ledger technology, the landscape is beginning to change.

In the book, Harrap notes the many blockchain-based protocols have emerged in recent years as potential competitors to the SWIFT network. These aim at connecting the disparate payment landscape by getting all payment providers on one common API layer to standardize payments between intermediaries.

Ripple, for instance, is a real-time gross settlement system, currency exchange and remittance network built upon a distributed open source protocol. Ripple supports tokens representing fiat currency, cryptocurrency, commodities, or other units of value such as frequent flier miles or mobile minutes, and purports to enable “secure, instantly and nearly free global financial transactions of any size with no chargebacks.”

By joining Ripple’s global network, RippleNet, financial institutions can process their customers’ payments anywhere in the world instantly and cost-effectively. Banks and payment providers can also use the protocol’s native digital asset XRP to transfer money with negligible fees and wait-time. Launched in 2012, Ripple now claims to be serving more than 200 customers around the world.

Stellar is a competing protocol founded by Jed McCaleb, the co-founder of Ripple, after he left Ripple in 2014 over “differences” in opinion.

Stellar is an open source decentralized protocol for digital currency to fiat currency transfers that allows cross-border transactions between any pair of currencies.

Like Ripple, Stellar also offers a fast and affordable remittance solution but unlike Ripple which focuses on enabling financial institutions to directly transact with each other without the involvement of any third parties, Stellar focuses on providing fast and cheap international money transfers for everyday people, particularly the unbanked and underbanked populations.

In the paper, Harrap also notes the rise of stablecoins in 2018. A stablecoin is cryptocurrency that is pegged to another stable asset like gold or the US dollar. According to him, these offer exciting new potential for remittances.

“[Stablecoins] offer self-custody of cryptocurrencies that have all the features of a national currency but without the cumbersome onboarding requirements and counterparty risks associated with banking systems in the developing countries,” Harrap says. “This is the most likely future direction and growth in the cryptocurrency remittance space.”

Founded in 2014, Bitspark is a Hong Kong-based company that provides a cash-to-crypto solution. Bitspark relies on a network of cash in and cash out locations that offer deposit and withdrawal methods for customers. These cash points can be Bitspark agents, shops or vaults. Bitspark claims to be the first company in the world to have utilized cryptocurrency for money transfers without banks.

Featured image: George Harrap, CEO and co-founder of Bitspark.