Let’s start with something that most of us have used without even knowing it: Society of Worldwide Interbank Financial Telecommunications (SWIFT). This system is used by most banks to facilitate money transfer across borders. According to their site, “SWIFT is a global member-owned cooperative and the world’s leading provider of secure financial messaging services.

We provide our community with a platform for messaging, standards for communicating and we offer products and services to facilitate access and integration; identification, analysis and regulatory compliance.”

www.swift.com

Something important to note is that SWIFT is not a bank, it doesn’t hold the funds for the transferor. It simply facilitates the compliance and tracking of that wire or monies across nations. SWIFT assigns each financial organization a unique code that has either eight characters or 11 characters. The code is interchangeably called the bank identifier code (BIC), SWIFT code, SWIFT ID, or ISO 9362 code.

All of this sounds secure, but there are vulnerabilities when using centralized systems. Last year hackers successfully took control of a Russian partnered SWIFT bank and moved approximately $6m USD to their own accounts. SWIFT maintains these attacks are done through social engineering and weak-end points at the customer (bank) level to gain access.

In June of 2018, Jane Collins nearly lost the home she was buying after moving to Canada because the £54,000 deposit transferred from her Nationwide account went missing. It eventually arrived six weeks later. Nationwide blamed poor communications along the chain of banks.

While a quick search on Reddit, Quora and other forums will read a plethora of desperate users trying to find out why their transfers are stuck in “limbo” for 10+ days. While we hear criticism of even the most well-known, arguably the slowest network, Bitcoin (BTC) taking hours to move a BTC throughout the ledger; the technology is improving and we see blockchains touting 1,000s of Transactions (Tx) per second now.

Blockchain Problem Solving

On the heels of J.P. Morgan announcing “JPM” Coin, we saw financial providers exploring and actively using now, blockchain technology. Though they are private distributed ledger systems (DLT), it brings more use-case to the technology. JPMorgan will be issuing the tokens to their institutional customers first and it will be 1:1 to the dollar. Once a transaction is settled, the token will be destroyed.

Jamie Dimon, CEO of JPMorgan

Role of Tokens and Blockchains for Banking

These banks can mitigate fraudulent transactions using some of the base safeguards of cryptocurrency. If you have not used cryptocurrency before, it is a pretty simple process. When there are two or more parties involved, they will need to send their token that represents value by unlocking their assets with their private key. Only when both parties unlock their accounts with the private keys, will the monies be cleared for transport. The blockchain, whether private or public; by design, will allow the transactions to be monitored. This means no “lost” accounts that took days to cross borders and blaming on receiving bank why funds have not arrived yet.

Even though JPM Coin won’t be the transparency the purists want, we can all agree that a blockchain will benefit our monetary system and help reduce those notorious “lost” transfers.

The team at Ripple (XRP) understands that SWIFT can use some change and has been trying to tackle this problem using their native token and building a global payment network. They are calling this RippleNet, its design of use is similar to JPM Coin. The battle for blockchains has been going on for years between Ethereum, NEO, EOS, ADA and others; but the business battle will be first mover adoption by larger businesses that have trust between each other. Overall, it is a win for the cryptocurrency and blockchain enthusiasts.