1. International network AML/CFT Institute
4th international scientific and practical conference
"The Era of Crypto Economy: New ML/TF Challenges and RechTech
Fintech Ecosystem and the Growing Competition in the Market for Cross-Border Interbank Payment Services
I A. Kopytin
Ph.D. senior researcher at the Energy Research Center, Primakov Institute of World Economy and International Relations
Moscow
2018

2. The cross-border interbank payment services market – changing times
Swift – a recognized leader in the market for cross-border interbank payment services since the 1970s
After the 2008 financial and economic crisis, there was a demand for a new type of inter-bank cross-border payment services:
Fintech platform Ripple
Blockchain World Wire (BWW) IBM
Interbank Information Network (IIN) J.P. Morgan Chase & Co
Swift transformation

3. Swift – a recognized leader in the market for cross-border interbank payment services
Founded in 1973 by banks as a standardized system for sending and receiving cross-border financial messages
Headquartered in Brussels, Belgium
Status - a cooperative managed by thousands of member banks
Handles about half of global cross-border payments
Brings together 11,000 banks and financial institutions
Operates in more than 200 countries

4. Ripple - a new, technology-based approach to interbank cross-border payments
Founded in 2005
Headquartered in the U.S.
Status – a private fintech company (centralized)
Co-investors – major market players: Google, Goldman Sachs, Standard Chartered Plc, Banco Santander SA, etc.
Ripple cryptocurrency, XRP, was launched in 2012
The pilot version is used by over 100 banks: Santander, Bank of America, Axis Bank, Standard Chartered, etc.
Ripple strengths
Transactions between any currencies and assets
Fast transfer times
Unlimited scalability
Ripple is not a “disruptive technology”; it aims to improve existing payment technologies by speeding up exchange transactions and facilitating trade in low-liquid assets.

5. IBM is another challenger to Swift
Blockchain World Wire (BWW) is a direct competitor of Swift and Ripple
BWW currently operates in a pilot mode
Ideologically, IBM offers a new, simple way to move money:
two financial institutions connect their payment systems to BWW via API
the sender of money selects the currency in which the amount to be sent is denominated, the currency in which the payment is to be credited to the recipient’s account, and the digital asset that will serve as a bridge between the two currencies
the sender presses the key (validates the action) and the system converts the amount in the payment currency into a digital asset, and then the digital asset into the settlement currency
The whole process takes seconds to complete and is recorded in the registry for clearing purposes
Competitive advantages:
The BWW algorithm can be embedded into other IBM products, facilitating and accelerating its propagation across the extensive business communication network
The use of Stellar as a bridge currency, which, although more volatile, cannot in principle even be considered as a security, unlike XRP, which addresses the issue of regulation

6. Interbank Information Network (IIN) J.P.
Morgan Chase & Co is another company to compete in the market for cross-border interbank payment services
J.P. Morgan Chase & Co
Interbank Information Network (IIN) J.P.
Hosted on Quorum blockchain
Piloted in October 2017
Launched in September 2018
Connects, so far, 75 banks, including Santander, Societe Generale, Royal Bank of Canada and ANZ.
Competitive advantages:
Significant time savings in performing compliance checks. Compliance procedures currently delay payments for up to two weeks. The proposed technology of interbank information network allows compliance procedures to be completed within minutes

7. Swift's response to potential competitors
Swift joined Linux Foundation (a non-profit organization) distributed ledger initiative, Hyperledger
Swift launched a proof of concept (PoC) to explore whether distributed ledgers may be able to help banks reconcile nostro accounts more efficiently and in real time, lowering costs and operational risks. In this work, the company relies on open-source Hyperledger technology.
Swift launched the Global Payments Innovation (GPI), a cloud-base technology that allows bank corporate customers to make payments in under two hours as well as to track the movement of the funds within the system, similarly to FedEx packages (Swift expects GPI to handle 85% of all transactions by 2020)
Swift, in partnership with 28 banks, piloted the use of distributed blockchain technology for interbank payments. The testing involved the creation of 528 sub-ledgers to avoid confidential information being revealed to rivals. It is estimated that all of Swift members would need to build 100,000 sub-ledgers to carry out transactions. As a result, it was concluded that in the future, the obstacles to using the blockchain system for cross-border interbank payments will be overcome, but at the current stage, blockchain is not ready for wide-scale adoption.

8. Conclusions
SWIFT, for now, retains its status as the global leader. The competition in the market for cross-border interbank payment services has only begun. Importantly, with the race to develop the final solution still on, the testing of new technologies continues. It is highly likely that many market agents work in private to keep the details of their work secret.
Ripple, BWW, and J.P.Morgan Chase & Co offer radically new business solutions to making payments:
Swift solution involves charging a fee for intermediary services related to the transfer of funds and payment documents.
Swift competitors offer to pay their customers for using an infinitely scalable computer program.
The growing competition is good news for the real sector and private individuals. Whoever wins out, cross-border payments are set to become faster and cheaper.

9. Ripple specifics
A fully centralized private system controlled by Ripple, a company
The system consists of two parallel elements: RippleNet and XRP cryptocurrency
RippleNet (a non-blockchain based network that uses Interledger protocol. It functions as an online payment system that integrates with other payment systems. Within Ripple, gateways act as banks that operate within a single network, with Ripple playing the role of a central bank. There are few independent gateways (servers) in the system, most of them are controlled by the company itself. Transactions and settlements in the system are made using the Ripple protocol consensus algorithm (PPCA)
XRP (a blockchain protocol for consensus voting of validated nodes, that is, pre-selected by Ripple. Consensus is achieved when the transaction is confirmed by 80% of validated nodes. These nodes, which are predominantly operated by banks, market makers and Ripple itself, support real time gross settlement system (RTGS).
It is not mined. 100% of XRP (100 billion units) were issued prior to the launch
The cryptocurrency is deflationary by nature – XRP is burnt with each subsequent transaction
XRP cryptocurrency is not the only settlement tool in the Ripple cryptosystem, the company works both with other cryptocurrencies and fiat money

10. THANK YOU