Ripple - cross-border payments may never be the same again

26th April 2018

If you haven’t had your head buried in the sand for the past 12 months, then you will no doubt be familiar with the cryptocurrency surge towards the latter end of last year. Despite Bitcoin cementing itself as the main player with prices touching $20,000 for a single coin, believe it or not, there are other coins with equal popularity. Whilst critics struggled to make sense of the bizarre growth, largely because many coins don’t have a strong business roadmap or purpose, the technology behind one coin is beginning to take the overseas payment world by storm: Ripple.

What is Ripple?

Ripple has began its quest to disrupt the cross-border payments industry. With almost instant payments, reduced credit and liquidity risk from the process and blockchain technology, traditional payment ledgers such as Swift are becoming increasingly concerned. Unlike traditional payment methods, which allows manual prices to be set, Ripple’s transparent network means pricing is optimised and will find the best available price. Ripple’s aim is to replace the likes of Swift and begin handling the $5 trillion transferred each day.

What is the cryptocurrency link?

Ripple has a host of products, which ensure rapid liquidity. These products use the Ripple coin, XRP, to bridge assets that businesses can use as a transfer between two fiat currencies. The business would purchase an amount of XRP and send it through Ripple's network.

This isn't entirely new however, as XRP has been compared to the role US dollars play in international transfers. The currency is often used between currency pairs that are rarely traded and would travel via US dollars.

How does Ripple work?

How does it differ to current payments?

Here are the main differences of the Ripple network versus Swift:

Settlement ProcessBatch cleaning & settlementConsensus
Speed2+ business days3-6 seconds
Peak Volume19mm Messages/Day86mm Transactions/Day [RL Est.]
CurrencyFiat currenciesUniversal
Transaction CostOperator feesSecurity Cost

What are the benefits to me?

As with most cross-border payments, the two main consumer questions that arise are: when will the recipient receive the funds and what's the cost? Thankfully for both the recipient and sender, and as we've briefly touched on already, Ripple aims to reduce both of these. Payment times are dramatically decreased and are almost instant. Ripple will also consider a cheaper payment path if it's available, which helps to reduce consumer costs.

Other benefits include:

  1. There's flexibility to use multiple paths for a single payment
  2. The bank can net their payments with other peoples' payments, so that the cost drops for everyone
  3. Ripple is part of the fintech revolution but unlike other fintechs, it's a bank first. This is a win-win for both the consumer and regulators as they're trusted.

When will Ripple be implemented?

Within the past week, Santander have already implemented Ripple within certain territories, so we suspect other banks could follow suit, too. It might be difficult for Santander's competitors to turn a blind-eye to Ripple's speed and cost-effectiveness. Although it could be a contentious decision; given the banks' financial gains on higher cross-border payment rates but consumer demand will likely prevail.

We are currently exploring Ripple and the benefits it will bring collectively. It's an ongoing conversation but all the signs suggest Ripple has laid down a path to becoming a dominant player in cross-border payments.

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