German Online Bank Replaces SWIFT with Bitcoin for International Loan Transfers
| Updated by Alexandra Sayapina · 3 min read
Bitbond may drive out the global leader by using Bitcoin’s blockchain for international transactions. The borderless nature of this approach may boost the development of new business models.
The Swift international transfer system has definitely earned the trust of banking institutions all over the world. The technology that came into existence over 40 years ago revolutionized the international money transfers: it set the new standards for security and speed of transactions. It is not losing the popularity over years: in March 2018, SWIFT recorded an average of 30.74 million FIN messages per day.
The banking sphere is experiencing a new revolution as blockchain is gaining more and more popularity. The new accomplishment is the usage of Bitcoin for handling international loans – the new service available for the clients of German online bank Bitbond.
Bitbond was founded in 2013, the financial institution is a global marketplace lending platform for small business loans. The total loan volume of Bitbond exceeds $10 million. The company has solid experience of working with blockchain and has decided to continue its development with the new approach to international transactions. The bank is mostly working with small business.
The money transfer via the new system is using Bitcoin’s blockchain; however, the loan amount is held in the cryptocurrency not longer than a few minutes. After that it is exchanged back into the necessary currency. This implementation eliminates the risks associated with the high volatility of cryptocurrencies.
German businessman and founder of Bitbond Radoslav Albrecht explained the advantages of the new service: “Traditional money transfers are relatively costly due to currency exchange fees, and can take up to a few days. With Bitbond, payments work independently of where customers are. Via internet it is very, very quick and the fees are low.”
Indeed, SWIFT is a reliable technology but it leaves room for perfection. First of all, SWIFT does not enable the money transfers. The system is just providing a secure way to communicate about payment orders. Secondly, each transaction includes various fees: both for the correspondent and recipient banks, let alone currency exchange rates. Thirdly, the transaction time of traditional SWIFT money transfers is far from instant payments.
The new blockchain-based solution by Bitbond is reducing transaction costs and increases their speed while enabling the high level of security. These features mostly deal with the technical side of the project. But the key factor that may attract clients to Bitbond is the possibility to process payments irrespective of the client’s physical location.
Nevertheless, the SWIFT network is not going to give up in this competition. Its global payments innovation (gpi) seems to be promising – and the whole system enjoys the benefits of being a credible partner. The high demand of the system gives to it lots of opportunities which Bitbond may lack. For example, the testing of SWIFT’s blockchain proof of concept, which is a part of gpi, included 22 global banks.
Alexandra is a software engineer who specializes in core banking systems development for financial and IT spheres. Taking strong interest in blockchain, cryptocurrencies, and IoT, Alexandra got deep understanding of the emerging techs believing in their potential to drive the future.