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- A new report from the Boston Consulting Group describes that payment providers like Ripple outperform banks in many sectors.
- Banks must develop new technologies to keep pace with the latest advances.
Cryptocurrencies have become an integral part of today’s financial market and are in direct competition with traditional payment providers such as banks or world-renowned payment networks such as SWIFT or Mastercard. According to a new report by the Boston Consulting Group (BCG), banks must develop strongly, otherwise new young talents in the industry such as Ripple will outpace them.
Ripple and other payment providers better than banks in many areas
In more than 34 pages, the report examines the advantages and disadvantages of traditional and new payment systems and also takes an in-depth look at new technologies. According to BCG, the blockchain technology is particularly forward-looking, as it delivers a much better performance in many areas than old bank technologies.
Companies such as Ripple outperform banks in terms of speed, pricing, API integration and overall customer experience. Therefore BCG appeals to banks and other large financial institutions to develop new solutions, because otherwise young projects like Ripple or Earthport will steal their customers:
Card networks, fintechs, and infrastructure providers such as Ripple and Earthport have entered the cross-border payments space in recent years. These challengers often outperform banks in speed, pricing, API integration, and the overall customer experience. To stay competitive, banks will need to change their approach.
For a long time, SWIFT and Co. were considered the absolute benchmark in the industry and were unrivalled. This can be seen in the fact that more than 11,000 financial institutions worldwide are connected to the SWIFT API and that their existing services continue to function flawlessly in their current state. However, BCG states that the new blockchain-based payment solutions offer significant cost and speed advantages:
Many banks have introduced SWIFT gpi to improve the speed and tracking of international payments. But with challengers providing convenient solutions like ‘request to pay’ that facilitate remittance and reconciliation, banks need to continue refreshing their own offerings.
To keep pace with the current trend, banks should reduce their cost base, increase operational efficiency and completely modernize their core business processes. In this context, it can be important to explore new ways to optimize their own business processes with Fintech partners, such as Ripple.
The digitalization of all processes from sending the transaction to receiving should also be fundamentally revised in order to offer the end customer the best possible experience. It is also important to implement a simple and reliable KYC process:
In addition, as part of their correspondent banking realignment, wholesale banks should consider rationalizing the number of correspondent banks in high-risk jurisdictions in order to minimize the compliance risks and costs. They should also consider applying global standards for know your customer (KYC), sanctions screening, and transaction monitoring to identify money-laundering and terrorism-financing attempts.
Ripple and the banking industry
Ripple is already working successfully with a number of banks such as Santander Bank. The largest European bank uses Ripple’s technology in its App One Pay FX, which can process cross-border payments in real time. Ana Botín, CEO of Santander Bank, says that 50% of the total transaction volume is now processed via One Pay FX.
In addition, Ripple has already met with several representatives of various central banks in the past, but no sensitive information about cooperation or similar has been disclosed at these meetings to date.
