Speed and Cost of Payments Don’t Need to Be at Odds
Our previous Ripple Insights article, highlights that remitters care most about reliability, speed, convenience and cost—key elements that are inherently at odds when it comes to providing cross-border payments. Particularly, we explain that speed and cost are most at odds and that no company has been able to solve for both elements at scale.
In this post, we analyze why delivering on all four elements is not an impossible task, even though it is far from easy. Decades old infrastructure, perverse incentives, stringent regulations and de-risking have left cross-border payments mostly free from innovation during a time when other industries are rapidly facing disruption.
At Ripple, in close partnership with our customers, we are changing the status quo and providing the ability for our customers to build differentiated value propositions—offering one or all four of the elemental building blocks that consumers care about most. With Ripple, you can eliminate customer trade-offs and deliver reliability, speed, convenience
What Has Changed?
Going four-for-four requires a radical shift—something to break the trade-off between cost and speed. The novelty rests in the use of digital assets in the payment itself given the inherent benefits of speed, cost and scalability. One digital asset specifically built for the purpose of exchange of value is XRP. XRP solves for high-velocity, cost-efficient payments, and does so at scale.
XRP: Built for Payments
XRP settles payments in 3-5 seconds, instead of 3-5 days, regardless of where in the world it is transacted. Furthermore, XRP is borderless—trading on digital asset exchanges around the world—with balances kept on the decentralized XRP Ledger, an open-source blockchain protocol that is highly effective for payments.
Because these exchanges offer pools of XRP liquidity across the globe, the digital asset essentially removes the need for pre-funding accounts in destination currencies. XRP acts as a bridge currency and provides the On-Demand Liquidity needed to enable payments in countries around the world in near real-time. The cost of pre-funding is reduced dramatically while the speed of settlement from one fiat currency to another, with XRP in the middle, is reduced from days to seconds.
Additionally, in a world experiencing an increasingly fragmented series of payments systems covering domestic and international traditional and non-traditional players and channels, XRP is interoperable. That is, when XRP is layered into the Interledger Protocol (ILP) XRP enables secure transfers between differing ledgers, and creates seamless integration across systems (think integration into domestic payment schemes for last mile payout).
What This Means for Financial Institutions
By enabling digital asset settlement into Ripple’s existing cross-border payments infrastructure, otherwise known as RippleNet, we enable financial institutions to deliver on the four key elements that remitters care about most. Our modern technology allows for a highly reliable point-to-point payment between our customers. Convenience is delivered through RippleNet’s hundreds of customers in our network with products servicing the largest and most active corridors in the world. Adding digital assets “in the middle” allows RippleNet customers to offer low-cost remittances with near instant payments across the globe.
Our customers implementing this technology have built a differentiated value proposition. They are now able to offer remittance at a lower cost than competitors, while providing the speed and payout capabilities to deliver a superior customer experience. This goes a long way in building trust with the sending and receiving parties. Eliminating delays or reducing the period from which a payment is in-flight, solves for what could otherwise be a period of high anxiety—hoping that the payment reaches the recipient and is free from added fees or levies along the way.
Interested in taking a deeper look at the technology behind RippleNet and On-Demand Liquidity? Contact us.