On the surface, traditional bankers and third-party disruptors may not always have the same approaches in mind, but the gap between their goals and how to go about it is increasingly getting smaller.
Ripple, which has its roots in the virtual currency movement, has ditched a consumer-facing business model to actively seek ways to help banks move money and update the correspondent bank network. Another fintech innovator, Dwolla, has long tried to work with banks to improve the speed and flexibility of their payment offerings.
But these companies also understand their current spot on the banking industry's totem pole, and view efforts such as Swift's Global Payments Innovation initiative, which aims to build a modern cross-border payments system on legacy infrastructure, with the respect it has rightfully earned.
"One thing Swift has globally is a connected network of financial communications, and the banks trust a message from Swift," said Ben Milne, Dwolla's chief executive.
If a Swift message informs a bank that an individual or company is going to pay $1 million for something, that bank will be confident that it will be paid, Milne said. "If I made that call, they wouldn't trust me, but when it comes as a Swift message, it really means something."
Nevertheless, Milne says that from a technology standpoint, Dwolla can deliver that same confidence.
"Where we really come in is connecting to the regulated infrastructure — the custodians, the banks — to when the transactions actually have to move," Milne said. "We can integrate with Swift messages, so a Swift message can actually tell us what needs to happen and how the funds need to settle, and we become a very simple way of settling the funds between the participants."
Dwolla has stepped into the banking infrastructure through its branded APIs, allowing financial institutions to essentially put their names on Dwolla technology. It has also moved into real-time payments and clearing in the futures and options marketplace.
Dwolla continues to advance its ACH application capabilities for faster integration, support for integrated payments, usage-based subscriptions for variable billing and a more seamless bank verification process.
The end result, Milne said, is financial institutions using a simple "fund accounts" button to lower capital costs, increase transaction speed, decrease risk and increase liquidity.
"This has not been an opportunity for these companies in the past, and the APIs are the glue that holds it all together and makes it possible," Milne said. "They can make more money and provide a better experience for customers."
Ripple is also watching Swift's latest project, seeking a way to fit its own technology into the international banking system.
"With a cross-border payment, we try to make them essentially instant and with certainty, so it can't fail in the middle at an intermediary, all at a very low cost," said Chris Larsen, Ripple's chief executive.
Ripple is taking a broader view than some, focusing more on the Internet of Value that goes beyond just replacing existing payment methods. This holds true to its original model, where Ripple sought to enable any item — from bitcoin to beer — to be exchanged as a currency.
"It's a world where you have all of these Internet connected devices, billions or potentially trillions of them, and those devices are going to be enabled with value," Larsen said. "You need an incredibly low-cost infrastructure for that to actually happen, with a standard for moving and settling value."
Such a scenario can't rely on a correspondent banking system, as the numbers of transactions may increase and get smaller through "payment-enabled things," Larsen added.
For now, it is in the best interest of both banks and fintech companies to work together, especially on infrastructure challenges, Larsen said.
But the correspondent bank network, in which smaller banks and larger banks rely on one another for the proper settlement of cross-border transactions, will endure for some time, said Nancy Atkinson, wholesale banking expert and senior analyst with Aite Group.
"I've seen arguments where Ripple Labs is looking to replace that network, but that is not how I see it," Atkinson said. "For banks to participate in Ripple Labs and use the distributed ledger solution, they still need to reach agreements with each of the banks in the Ripple network."
Ripple has indicated it views those bilateral negotiations as outside of the purview of its network and solution, Atkinson added.
"That is one of the benefits of Swift in that they have experience with creating multilateral agreements for their model," Atkinson said.
Theoretically, Ripple could accept that responsibility for their network and develop a common agreement to which all participants must commit, Atkinson added. "But they lack that experience."
Ripple says it is moving in that direction with Interledger, its open-source protocol standard that financial institutions can use to move currency or anything else of value.
"We believe this is the best standard because it has the most scale and transaction privacy, and you don't have to use cryptocurrency to use it," Larsen said. "It can change dollars to euros."
Ripple is also banking on its XRP digital currency playing a role in this distributive ledger model.
Ripple announced last week that it struck a deal with SBI Holdings to form a company called SBI Ripple Asia to serve banks in that region. The companies plan to explore trading Ripple's XRP on SBI's platform, which they say is the largest trading exchange in Asia.
"The old way of thinking in the bitcoin community was that everyone had to adopt a single ledger to be the core of everything worldwide," Larsen said. "We don't think it will work that way, because we look at it more like the Internet, with millions of databases on a common Internet protocol."
There is little doubt that banks have a problem moving money and other financial assets, Dwolla's Milne said. As such, they are more open than ever to discuss new APIs, new connecting technology and blockchain, the ledger system that bitcoin uses.
But it will all take time. When hundreds of billions or trillions of dollars are part of the discussion, many will dig in their heels to slow things down.
"A lot of it is just figuring out how to actually do it," Milne said. "It is amazing how many walls around knowledge are built up in large institutions. It can take years for someone to give you the document you need to affect change."
Banks in Europe don't want to rebuild infrastructure and wait three years to enter the U.S. market and communicate with banks here, Milne said. "They want to do it in three weeks, and we can't predict network effect on APIs in that area, but it feels very real."