Cryptocurrencies may have got off to a bad start in 2018, with valuations plummeting, but faith in its underlying technology, the blockchain, or distributed ledger technology, has never been stronger.
Whilst bitcoin is still, by some distance, the most valuable cryptocurrency, with a market cap of $171 billion at the time of writing, the next two largest, Ethereum (market cap $84bn at time of writing), and Ripple ($38bn) have a range of practical applications that bitcoin, a more pure form of currency and the closest crypto equivalent to a fiat currency in terms of how it is used; struggles to match.
Ethereum is the crypto of choice when it comes to raising money for Initial Coin Offerings (ICOs), for example. Investors purchase Ethereum in order to exchange it for the internal currency of a particular blockchain based project, which could be anything from a data storage solution for the healthcare industry, to a new way to access music from emerging artists, to a logistics and distribution platform for the agriculture industry.
Ripple, on the other hand, is the cryptocurrency of choice for the payments industry. The project has made huge strides since it was first launched in 2012. As its wikipedia page reveals, Ripple is a combination of real time gross settlement system, currency exchange and remittance network; the ultimate international money transfer solution, built using distributed ledger technology. Ripple can accept anything from fiat currencies to frequent flier miles tokens onto its platform. It is viewed by an increasing number of major financial players as their future money transfer system of choice.
Why? Ripple can process transactions quicker, and cheaper than its fiat currency rivals, such as SWIFT. SWIFT showed itself recently to be vulnerable to exploitation, after its role in a $1.77bn fraud perpetrated by 2 junior officials at a Mumbai branch of India’s Punjab National Bank, allegedly on behalf of billionaire jeweller Nirav Modi.
After completing numerous trials with big banks, Ripple has announced several ground-breaking partnerships in the past couple of months.
Last week, Ripple announced that it has signed an agreement with the Saudi Central Bank which will allow local banks to deploy its bespoke xCurrent crypto for overseas transfers. Credit rating agency Moody’s estimates that this will save some $400m annually, in cheaper transaction fees and operational costs.
“Saudi banks will potentially improve their profitability on cross-border transactions by reducing the cost of each transaction, while gaining revenue with higher volume as the customer experience improves with the saving of money and time.”
They added that:
“The World Bank estimates that fees on remittances average a high 7.1% of the transaction volume, and we estimate that cost could fall 50% with Blockchain.”
Ripple has also been busy in South America and the subcontinent. In a press release issued this week, the company announced partnerships with Itaú Unibanco from Brazil and IndusInd from India, as well as with three remittance services; InstaReM from Singapore, Beetech from Brazil and Zip Remit from Canada, who will all be making real-time international payments using Ripple’s protocol.
And in China, too. Ripple are partnering with Lian Lian, a “leading Chinese money service company” with 150m registered users, who will use RippleNet’s xCurrent platform to receive real-time, cross-border remittances, invoice payments and e-commerce payments. Lian Lian works with the likes of Amazon, Ali Express and eBay, and is a key player in China’s online commerce market, the largest in the world, worth $627 billion in 2017, of a global market projected to reach $1.32 trillion this year.
Ripple says that it is now partnering with more than 100 major financial services companies worldwide. Perhaps the most surprising news, given they are hardly famed for their progressive financial services activities, is Ripple’s collaboration with Western Union.
Bloomberg confirmed the speculation last week – Western Union are trialling transactions services with San Francisco based Ripple. A Ripple spokesperson told Bloomberg that “We’ve been testing different products with Western Union for a while. We’re excited about our work towards a pilot implementation of xRapid, which uses XRP in payment flows,” whilst Western Union said that “we do have some tests with Ripple.”
When a business like Western Union begins experimenting with Ripple, then it is probably safe to say that the crypto solution is about to take the world of money transfer by storm.
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