Almost a year ago I wrote my blog “Blockchain and the Ripple effect: did it Ripple?”. Now twelve months later we may conclude it did. And even more than that. Ripple is making many waves. A lot happened both in broadening their offerings and in enlarging their network. A growing number of banks and payment providers, increasingly join RippleNet, Ripple’s decentralized global network, to “process cross-border payments efficiently in real time with end-to-end tracking and certainty”. By using the growing set of Ripple solutions they are able to expand payments offerings into new markets that are otherwise too difficult or too expensive to reach. The focus of Ripple therefor has especially moved towards emerging markets.
BROADENING RIPPLE OFFERINGS
Ripple was set up in 2012 to create a streamlined, decentralized global payments system named RippleNet, using technology inspired by the blockchain, to record transactions between banks. RippleNet is an enterprise-grade blockchain platform, that nowadays has over 100-member banks and financial institutions. These partners can use all the Ripple offerings.
Ripple makes software products based on blockchain technology and sell them to banks, payment providers and others to be used on RippleNet. These are aimed to make cross border payments truly efficient for these players and their customers. Next to their digital asset XRP, the XRP Ledger, and xCurrent, that helps banks settle transactions, Ripple has added a number of new services/offerings to the platform including xRapid and xVia. This in order to attract more clients to enter RippleNet. Ripple is now taking the next step to help build the Internet of Value (IoV), by establishing an Infrastructure Innovation Initiative.
a. XRP: digital asset
From the outset, XRP, Ripple’s digital asset was expected to be an important part of Ripple’s decentralised payment system. Ripple uses its own XRP cryptocurrency as a payment method to make it easier for banks to move money internationally. Banks and payment providers can use Ripple’s digital asset XRP to further reduce their costs and access new markets. One rationale for using XRP is that unlike Bitcoin, the token has one narrowly defined (payments method!) but clearly useful purpose: to help banks move cash faster and more cheaply, especially across borders. The token could be used as a kind bridge currency between fiat currencies. For example South African rands in Johannesburg could become XRP, which could then be turned into baht in Thailand. That could help banks avoid the time consuming and expense of tying up money in different currencies in accounts at other banks.
b. xCurrent: processing payments
RippleNet is powered by xCurrent, for payment processing. xCurrent is the new name of Ripple’s existing enterprise software solution that enables banks to instantly settle cross-border payments with end-to-end tracking (and bidirectional messaging across RippleNet). It provides real-time messaging, clearing and settlement of financial transactions. The xCurrent messaging platform however does not involve XRP. It includes a Rulebook developed in partnership with the RippleNet Advisory Board to standardise all transactions across the network. That ensures operational consistency and legal clarity for every transaction. The Interledger Protocol (ILP) is the backbone of the solution and makes it possible for instant payments to be sent across a variety of different networks.
c. xRapid: sourcing liquidity
xRapid is one of Ripple’s newly developed solutions. It is aimed for payment providers and other financial institutions who want to minimize liquidity costs “while improving their customer experience”. This especially is useful in emerging markets where payments often require pre-funded local currency accounts around the world. As a consequence, liquidity costs are high.
xRapid uniquely uses digital asset, XRP, as a money-transmission medium. This to offer on-demand liquidity. By embracing XRP, banks and other providers will solve the liquidity issue most financial institutions face right now. With xRapid and XRP, financial institutions can eliminate the need for costly intermediaries or pre-funded Nostro accounts in destination currencies. This may dramatically lower the capital requirements for liquidity, thereby firmly lowering costs while enabling real-time payments in emerging markets.
“Ripple, XRP and fiat currency fit hand in glove. What we’re doing together is realizing one of the best use cases for frictionless transactions, which is international settlement. xRapid allows us to drive down the cost of currency exchange and global settlement, making our customers more competitive and saving them tens of millions of dollars each year.” Brad Garlinghouse, CEO of Ripple
d. xVia: sending payments
The xVia solution is also a newly presented product for corporates, payment providers and banks who want to send international payments across various networks (through a bank or payment provider) on RippleNet. By using a standard interface as a simple API, xVia enables users to send global payments with transparency into the payment status and with rich payment information (like invoices), without the need of software installation.
e. Internet of Value
Ripple is now taking the next step to help build the so-called Internet of Value (IoV). This by establishing an Infrastructure Innovation initiative. IoV is Ripple’s long-term vision for moving money the same way information moves today — instantly. The ideal global payments network works just like the internet does — by using a common language to connect all those disparate systems (read ledgers!).
“All ledgers should work the same way and use a simple, common language so that money can move around the world real-time, much like information does today — enabling the Internet of value. “Dilip Rao, leader Ripple’s Infrastructure Innovation team
The goal of the Initiative is to help central banks, regulators, and market infrastructures pilot real-world blockchain solutions. Potential blockchain solutions include creating regional networks, reducing the cost of payments and opening up networks to new participants while managing risks. Ripple’s vision is that in the in the future (5 to ten years from now?) there will be a large number of isolated payment networks (as supply chains of value - trading houses or clearing exchanges) that have adopted blockchain and cryptocurrencies.
This Internet of Value will depend on interoperability between all these ledgers. There is a global technical standard that provides this level of interoperability: The Interledger Protocol (ILP). ILP can connect any network or payment system, without fundamentally changing how they work. All banks and payment providers — from the smallest bank to the largest institution — can use the open protocol to power payments across networks globally.
“My first priority will be piloting interoperability between payment systems, the use of DLT for domestic clearing and settlement and novel applications of xCurrent as well as our digital asset XRP.” “I look forward to exciting new initiatives in building the internet of value in 2018!” Dilip Rao, leader Ripple’s Infrastructure Innovation team
ENLARGING THE RIPPLE NETWORK
Ripple continues to build a dominant position in the global-blockchain-market. Ripple has seen interest in its network continue to accelerate around the world. RippleNet, Ripple’s decentralized global network of banks and payment providers utilizing, has seen growing attention from established financial institutions as well as from new players like money transfer companies and remittance companies.
Growing partnerships in RippleNet
Ripple’s enterprise blockchain, network, RippleNet — is constantly growing. Now, more than 100 financial institutions — across banks, payments providers and specialised companies — wish to use the power of Ripple’s blockchain technology “to provide a global payments experience that delivers instant, certain, low-cost global payments to their customers”. Next to established banks like Banco Santander, Credit Agricole, Ripple is increasingly concluding partnerships with payment institutions that are involved in or dealing with emerging markets.
Recent new clients include names like Bexs Banco, AirWallax, Credit Agricole, Cuallix, Currencies Direct, dLocal, IFX, RAKBANK, and TransferGo, amongst others. The can be added to older existing partners such as SBI Remit, and Siam Commercial who also use RippleNet to send cross-border payments.
Increased focus on emerging markets
The focus of Ripple is increasingly on emerging markets, esp. in Asia, with a big emphasis on markets like India and Japan. This is not surprising as more and more companies are seeing RippleNet as the answer for providing near-instantaneous low-cost cross-border payments in these regions. By the way, these countries have some of the largest remittance markets around the world.
“The payments problem is a global problem, but its negative impact disproportionally affects emerging markets. Whether it’s a teacher in the U.S. sending money home to his family in Brazil, or a small business owner in India trying to move money to open up a second store in another country, it’s imperative that we connect the world’s financial institutions into a payments system that works for their customers, not against them.” Patrick Griffin, Ripple’s head of business development
Ripple recently announced new collaboration with two new banks (Itaú Unibanco) (Brazil) and IndisInd (India)) and three remittance providers (InstaReM) (Singapore), Beetech (Brazil) and Zip Remi (Canada)) joining RippleNet to facilitate payments both into and out of emerging, global markets.
Entering the growing remittances market
Migrant workers throughout the world annually send large volumes of earned money to their families mostly in emerging countries. Ripple’s solutions are seen as a significant step toward helping corporates and migrant workers around the world unlock trillions of dollars in trapped working capital, accelerate global commerce, and send vital funds home as quickly as possible. Using RippleNet may as a result afford partner companies the opportunity to expand into growing remittance markets.
“Joining RippleNet allows us to connect to other member banks, extending our remittance footprint. This will help us scale our business and provide customers a first-class digital payments experience.” Peter England, CEO at RAKBANK
“As one of the top 10 FX houses in Brazil, it is vital for us to use RippleNet to quickly and seamlessly connect our banks to other member banks in Asia and Europe — giving us the ability to send fast, low-cost payments.” Luiz Henrique Didier, Chairman at Bexs Banco
Broadening Ripple offices worldwide
Ripple, that has been committed to provide “frictionless global payment services to financial institutions around the world”, is actively opening new offices to serve their growing customer base. Next to its headquarter in San Francisco, Ripple has offices in New York, Sydney (2015), Japan (through a joint venture with SBI in early 2016), London (2017), and last summer in the U.K. To support Ripple’s rapidly-growing customer base across Asia-Pacific markets they recently expanded further with new offices in Singapore and Mumbai (India).
“Our new office can support this ambition and equally brings us closer to our customer base across the Asia-Pacific region, enabling banks, payment providers and corporates to make instant payments into-and-out of the country using blockchain. As a leading trade and fintech hub, Singapore offers Ripple leverage in the region as we expand our global footprint.” Dilip Rao, managing director for Ripple APAC
Real world Ripple practitioners
While most banks and payment services that partnered with Ripple are still in the testing-phase, since early this year a – small but - growing number of institutions are also practising it.
Banks like Siam Commercial in Thailand, Standard Chartered in Singapore, Axis in India and Rakbank in the UAE are among those companies that are already sending and receiving payments in commercial volumes. In Japan, 61 members of the Japan Bank Consortium are in pre-production stage on a hosted Ripple platform.
Most are thereby applying the Xcurrent solution, while xVaria also shows some uptake. Ripple is also speeding up plans for xRapid, an XRP-powered product that seeks to enhance cross-border payments for emerging markets. Many however are still reluctant to apply xRapid and XRP, and that is not that strange given the recent massive fluctuations in in the cryptocurrency markets.
Use of xCurrent
A growing number of companies are eager to utilize Ripple’s xCurrent offering for cross border transactions including remittances. Most recent names are LianLian, Itaú Unibanco, IndustryInd and InstaRem that wish to use this offering to facilitate real-time, cross-border transactions to its customers, over the blockchain. Through the recent partnership with LianLian, RippleNet can now also provide instant access into emerging markets such as India, Brazil and China, some of the world’s largest remittances markets.
Recently, Hong Kong-based money service LianLian (the fourth largest payment processor in China) officially partnered with Ripple in order to make use of the company’s blockchain technology to process real-time cross-border payments into China. With RippleNet, LianLian will be able to provide merchants and consumers with on-demand payments, which they weren’t able to before. Under the terms of the agreement between LianLian and Ripple, the company will make use of the xCurrent platform for all of their settlement requirements. This platform will allow LianLian to connect to other Asian banks who are using the RippleNet network already. Those consumers who bank with these other institutions will be able to easily and effectively buy products on a large Chinese e-tailer in their own currency.
Axis Bank/Standard Chartered/RAKBANK
To meet the increasing demand for real-time payment services, Axis Bank (based in India), Standard Chartered (Singapore), and RAKBANK (United Arab Emirates) will now use RippleNet to send live, fast, frictionless cross-border payments. These three major banks use Ripple’s leading enterprise-blockchain solution xCurrent to power real-time, on-demand corporate payments from Standard Chartered to Axis Bank, and retail remittance payments from RAKBANK to Axis Bank beneficiaries.
Retail remittances between the two countries are significant and growing, thanks to the large Indian workforce in the UAE. These workers send a significant proportion of their salaries home every year, which RAKBANK wants to support with faster, easier, and more transparent payments between both countries. Processing individual remittance payments over RippleNet will allow RAKBANK to offer their retail customers an easier, more affordable experience, helping them to increase their market share in this crowded and competitive space.
Japan Bank Consortium (JBC)
The Japan Bank Consortium (JBC) — a collection of 61 Japan-based bank members brought together by SBI Holdings and SBI Ripple Asia — has made significant progress to become production-ready on RippleNet. JBC and Ripple worked together closely to create a unified platform for domestic and cross-border payments using Ripple solution xCurrent for real-time settlement. Aim is simplify international money transfers, reduce correspondent and operational costs, expand access to foreign banks, and increase visibility into the status of payments.
In addition, early 2018 JBC released an API connection called Common Gateway that provides banks with easy access to xCurrent on the shared platform. When ready, Japanese banks will easily connect to other member banks in Ripple’s network — furthering their reach with real-time global settlement. Each bank will have the ability to use Ripple solutions to send real-time, low-cost, transparent domestic and cross-border payments.
Japan Bank Consortium / Korean Banks
The Japan Bank Consortium has announced the launch of a new Ripple pilot with two of South Korea’s largest banks. The Japan Bank Consortium will use Ripple’s settlement technology, xCurrent, to settle transactions between participating Japanese banks and South Korea’s Woori Bank or Shinhan Bank. The pilot solidifies the Japan Bank Consortium’s commitment to modernize payment systems — specifically in the Japan/Korea corridor where Korea is Japan’s third largest trade partner — to send money instantly, removing the need for intermediaries while reducing the cost of sending global payments.
In the case of remittance companies, new partners Itaú Unibanco (Brazil’s largest private sector bank) and InstaReM (Singapore’s major remittance provider), have announced their plans to use xCurrent. InstaReM which processes more than 500,000 transactions per year, is thereby focusing on connecting businesses and individuals from Australia, Canada, Hong Kong, Singapore and India.
“We are pleased to partner with Ripple. Now, RippleNet members will be able to process a large number of payouts in Southeast Asian countries through InstaReM’s secure rails.” Prajit Nanu, co-founder and CEO of InstaReM
Use of XRapid
xRapid is also being tested by some of the top five money transfer companies worldwide. As of January 2018, MoneyGram,MercuryFX, IDT Corporation and Cuallix, have publicly announced their pilot use of XRP in payment flows through xRapid. Their aim is to settle retail remittances and corporate transactions quickly and to provide liquidity solutions for their cross-border payments, so enabling on-demand liquidity for global payments.
The Mexican financial services firm Cuallix was the first worldwide institution to announce its use of xRapid and XRP as a liquidity tool for cross-border money transfers. By doing this Cuallix , a credit and payments processing provider based in the US and Mexico, wishes to reduce the cost of sending cross-border payments. Since October it has used XRP in 10 to 12 transactions to send money between the two countries.
Ripple had recently partnered with the large money remittance company, MoneyGram, based in Dallas, Texas. MoneyGram expressed its wish to use XRP in its payments flows through the xRapid protocol to speed up their remittances at partner banks, reducing the costs of transferring money, while giving customers visibility into the status of their payments. On Jan. 11, Ripple announced that MoneyGram would begin testing the XRP cryptocurrenncy for sending remittances.
“Ripple claims an average transaction on its network takes between two and three seconds to process. By using XRP, MoneyGram would be able to move money "as quickly as information." Ripple CEO Brad Garlinghouse
Mercure FX and IDT Corporation
Mercure FX and IDT Corporation – two other payment transfer companies - were the last to partner with Ripple using xRapid.
“Digital assets promise fast transaction speeds but XRP is far faster than all of them, including bitcoin. Cutting settlement times from hours and days to just three seconds or less will remove billions of dollars in unnecessary intermediary fees.” Alastair Constance, CEO and founder of Mercury FX.
“We’re excited to pilot Ripple’s xRapid solution for on-demand liquidity. We expect that xRapid will enable us to settle more transactions in real-time and at a lower cost.” Alfredo O’Hagan, senior vice president of IDT’s consumer payments business
Use of xVia
Another two remittance providers, Beetech in Brazil and Zip Remit in Canada, have also joint RippleNet, using Ripple's xVia API to open payment corridors for their customers around the world. Additionally, both companies will look to establish a connection for their customers into China via e-commerce network LianLian, which signed up to RippleNet in January.
LianLian will utilize xVia, Ripple’s standard interface for corporates, payment providers and banks interested in sending cross-network payments. xVia’s simplicity and ease of use are attracting further attention from China, thanks in large part to LianLian International’s recent agreement to join RippleNet.
The other two fast-growing remittance providers, Beetech of Brazil and ZipRemit from Canada that recently entered the RippleNet will also be using Ripple’s xVia technology solution with open payment gateways for its customers from around the world.
VISION OF INTERNET OF VALUE
To realise its vision of Internet of Value more payments institutions must use Ripple’s solutions in a much higher volume. But most benefits in terms of cost savings can be realised when using Ripple's xRapid including the related XRP cryptocurrency. The problem is however that a number of partners – especially some global banks - are now moving away from the idea of using XRP. And that is understandable given the spectacular events on the world’s cryptocurrency markets recently including the enormous fluctuations.
“For Ripple to grow, it needs large banks to buy its payment software and use its XRP cryptocurrency, a major challenge considering it must convince financial institutions to change how they’ve been doing business for years. The biggest obstacle in convincing banks to use Ripple’s services is that many banks have other IT-related projects that are a greater priority to them than Ripple”. Garlinghouse said.
Regulation is however needed to create more stability in the cryptocurrency markets (see my recent block “Regulating Cryptocurrencies: Walking the Tightrope”, 12 February 2018) As soon as cryptocurrency regulations have taken a definitive path, banks and financial institutions can really start using xRapid and XRP for cross-border payments so getting the most benefits out of these Ripple solutions. In that case Ripple might become a rolling coaster!