A common narrative in the XRP community is that XRapid will ultimately replace SWIFT as the platform for cross-border payments in the banking industry. This is premised on the superior technical capabilities of XRapid over SWIFT. One of its key strengths is the instant settlement part of it. Unlike SWIFT, XRapid allows banks to settle transactions instantaneously using XRP. But while this all sounds great, it would be foolhardy to believe that it will be a smooth-sailing for XRapid going into the future. There are certain angles to the whole cross-border payments market that make things a little complicated for XRapid and could prolong the adoption process.
The geopolitical angle to the cross-border payments
There is more to the cross-border payments market than just technical capabilities. The most important of these is the geopolitical angle to it. SWIFT, for instance, is a tool for control, as can be seen with the case of Iran and other nations that are under sanctions. As such, if banks in the western world were to adopt a new system such as ripple’s XRapid, it would have to have this aspect of geopolitical control embedded in it. Chances of the U.S and other western powers adopting a system that takes this power away from them is quite minimal. But this creates an even bigger challenge.
Would nations that are looking to move away from the U.S hegemony adopt XRapid as a tool for cross-border payments? There is a good chance that they would not, and for one major reason, ripple is an American company and it controls a significant amount of all XRPs in circulation. Chances of a country like Russia moving from one American controlled system to the next are quite minimal. As a matter of fact, Russia has already developed its own version of SWIFT called the System for Transfer of Financial Messages (SPFS) and it’s looking to integrate it with the financial systems of some of its allies such as China, which already has its own system too.
The competition is stronger than is often presented
One of the biggest competitors to XRapid is the blockchain world wire, which is based on stellar. While often dismissed in XRP circles, the blockchain world wire has one huge advantage, and that’s the ability to settle instantly in either fiat or crypto. This is a huge strategic edge, considering that regulations in most countries may not move as fast enough, to allow for a mass shift to crypto-based instant settlements.
This makes it easier for banks to adopt a technology that allows them to settle instantly while using existing currencies. This is a win-win for them in that it allows them to settle transactions instantly, while at the same time, staying within the confines of existing laws. That’s not forgetting the fact that IBM has long-term working relations with over 90% of the global banking industry, relationships that could skew things to the IBM side.
Possible future scenario
In the future, XRapid will rise, but it may not be the global scale that most XRP (XRP) investors envision. It will most likely be part of a complex network of cross-border payment solutions that include stellar, SWIFT, SPFS and others that are coming up. Ultimately, a truly decentralized, permissionless and apolitical network will probably unify them all, in the build-up to the rise of a global currency.
This article is not FUD against XRP (XRP). It simply looks at the technology in a more grounded view, in light of existing realities.