in Crypto, XRP

If Ripple gets bought by SWIFT, will all XRP coins be worth nothing?

It’s hard to imagine any scenario where that would happen.

First, the vast majority of Ripple’s value is the XRP it holds. It’s almost impossible to imagine a deal that made sense for Ripple that involved destroying that value. What would SWIFT be buying exactly?

Second, it’s not clear where SWIFT would get the money to buy Ripple. Swift makes something like $30 million Euros a year. It’s unlikely that Ripple would sell for less than $3 billion, considering its XRP has a notional value of something like $48 billion. Ripple’s stockholders would almost certainly prefer to take their chances with the company selling its XRP over time.

Third, Ripple’s strategy doesn’t work without XRP. So what would SWIFT be getting for their money? They wouldn’t have the value of the XRP. Much of the team is working at Ripple because they believe in the strategy. Ripple’s blockchain strategy is XRP. So far as anyone knows, SWIFT doesn’t have a blockchain strategy. So what would the company be doing exactly?

But even if you somehow imagine that all of this happens anyway, it’s quite likely that XRP would be spun off. This would reduce the price SWIFT would have to pay for something we are presuming they don’t want. It’s quite possible that even without Ripple, exchanges and other interested parties would keep XRP and its ledger alive.

There’s just no way to structure the deal. It’s like if someone wanted to buy a plot of land but they didn’t want the mansion on it. Well then they’re not going to want to pay for the mansion. But the mansion is useless without the land. So how can you make the deal work? The current owners won’t sell for the value of just the land and new buyers won’t pay for a mansion they don’t want. If the XRP value goes to zero, why would SWIFT pay billions for it? And if they don’t, then why would Ripple sell to them an asset they value highly?

It really would make absolutely no sense at all.

Swift isn’t a tech company. It’s more an organization to provide banks the payment technology they need. So what would Swift want from Ripple? Maybe they’d want to get all their member banks the ability to use RippleNet for free, or even paying transaction fees to Swift. But Ripple would probably agree to a deal like that without Swift having to pay or buy anything, since broad adoption of RippleNet is key to Ripple’s XRP strategy.

Here are a few facts:

  • SWIFT is a messaging platform which sends messages between banks in less than a couple of seconds. Very similar to what you do when you send a whatsapp message over the internet, except there are message template for transactions and its the swift network.
  • Till recently, banks which received this messages were slow to process them, either due to complex spaghetti infrastructure, either because they preferred to sit on it to collect interest revenue.
  • a SWIFT message costs a couple of cents for major banks. Price is not uniform but it is globally less than 12 cents. You can maybe be charged 2 or 3 messages for a single transaction (status, reporting,…). SWIFT benefits from enormous economies of scale with 6bn messages transferred annually.
  • The SWIFT team within the banks (i.e. not SWIFT staff) are billing the messages heavily to the other departments because of people cost. I have heard numbers as high as 25 EUR. These people are in charge of maintaining the interfaces and gateways taking instructions from the payment engines and sending them over to the SWIFT network. While these activities can be made more efficient by the banks, managers are never enthusiastic about optimisations that reduce the number of direct reports. Anyway, what is important to understand is that this needs to be done regardless of the payment network used and will remain if you move to another network.
  • When banks charge fees to customer, there is a often a transaction processing fee and and FX fee.

Ripple was marketed on the premises that correspondent banking was in a poor state and there seemed to be little innovation. When doing international payment, the processing delays could take up to 3 days, there would be no visibility on status and the fees would be high. I believe these statements were true.


  • SWIFT has reacted by delivering on the gpi initiative. Within gpi, the major banks are committing themselves to SLAs for payment processing duration. SWIFT has built strong incentives to play by the rules and a strict monitoring of these SLAs to expose banks which would not respect them. To be fair, I think that the success of the initiative was partially due to the context of low or negative interest rates, thus leaving little incentives for banks to sit on the payments.
  • SWIFT has built the gpi tracker enabling financial institutions to view in a DHL-way where they are. When I left, there were serious talks about finding ways to enable the banks to expose these to their customers.

In practice, everything is far from perfect and some institutions are still struggling with the implementation of the gpi changes. Yet, I believe that the transaction speed issue and lack of tracking is mostly solved.

It means that the fee issue remains… however:

  • Transaction fees are going down because that this is what the bank customers are pushing for. The SWIFT message cost to the banks keeps decreasing by 50% every 5 years but it is currently at an amount where it no longer makes a difference on the final customer invoice. Ultimately, the level of transaction processing fees is at the discretion of the bank and is mostly there to pay for internal systems and related staff.
  • FX fees however are still pretty much present and this is where Ripple could make a difference. The thing is that SWIFT has no revenue from that activity which is covered by major global banks such as Deutsche Bank. Global banks love these fees, especially in the difficult context of these past years with pressure on other revenue streams. That’s why these banks will do everything to prevent Ripple from being successful as it will shrink the size of the market and force them to share the pie with a new entrant. They even go as far as partnering, applying the old logic of keeping your enemies close.

In that context, why would SWIFT acquire a company attempting to compete with its key customers, which are also the main shareholders*?

*entitlement to SWIFT shares is proportional to the number of messages sent by the institution on the network

Now taking another angle…the economics do not work.

SWIFT is a company with a 700 MEUR balance sheet and 300 MEUR of cash or liquid instruments. Disregarding the fact that SWIFT is a cooperative and would probably never be able of convincing the broad shareholder base, it would actually not have the means to acquire the company. The company is also pretty much restricted by the bylaws from doing anything risky and acquiring debt for this purpose. The only acquisitions made by SWIFT are relatively small ones, they are extremely rare and were never considered as successful internally.

My conclusion : SWIFT has absolutely no business acquiring Ripple but they should profusely thank Ripple for the wake-up call which triggered the gpi initiative!

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