Creating a wave: Is Ripple the future of international money transfers?
The global remittance industry continues to hit new heights. The World Bank has stated that remittance flows to low- and middle-income countries reached a record high of $529 billion in 2018, which was an increase of nearly 10% over the previous year.
These essential flows provide a much-needed service to economic migrants and connect families and friends throughout the world. The good news is that they are being increasingly serviced by a number of innovative new fintechs which have entered the market in recent years.
One such company is Ripple; and Jeremy Light, who is responsible for its strategic accounts in Europe, will be providing the opening keynote at this year’s IAMTN Global Summit, which takes place 2-3 October in London. He will discuss Ripple’s role in cross-border payments, how the company is servicing the growing remittance market, and wider industry trends to watch out for.
Enhancing cross-border payments
The idea for Ripple can be traced back to 2004, when founder Ryan Fugger first conceived the concept of a digital coin. Unlike other cryptocurrencies in the market, it was specifically designed to revamp the banking system.
Ripple, which attracted early investment from Google, has built a network, RippleNet, that connects banks, payment providers and other financial institutions. The network can utilise digital currencies, such as XRP. XRP has a built-in system called the XRP Consensus Mechanism, which approves transactions faster and more effectively. It’s therefore particularly useful for bank transfers, currency exchange and remittances.
Light believes that digital assets such as XRP will become increasingly adopted as a bridge currency in cross-border payments, in particular for On Demand Liquidity, taking significant friction out of the process. “The larger consumer tipping point is still to come,” he says. “As of now, you can’t easily use cryptocurrencies to pay for goods and services, but there is a clear and growing use case for crypto as a bridge currency. As a bridge between one fiat currency and another, it solves the liquidity issues in cross-border payments, and this will be a game changer.”
Advocates of Ripple believe that the company may ultimately replace incumbent industry protocols such as IBAN and SWIFT. Ripple provides those that handle remittances in emerging markets with a big competitive advantage by streamlining their payment flows and making them faster, more transparent and cheaper. Transactions on RippleNet are instant and tracked end-to-end, allowing money to move across borders seamlessly and into new markets without impediment.
“A growing number of digital-first payment providers are entering the global remittance market,” says Light. “They’re serving a need from populations that banks have neglected or avoided in the past. This is a huge opportunity to capture the unbanked and underbanked, and connect them to the global economy.”
“These payment providers are both recent start-ups, such as InstaReM, and long-established players like MoneyGram. We’re connecting them to RippleNet, giving them low cost, real time, 24/7 reach to payout to beneficiaries in countries across the world.”
RippleNet is now active in over 40 countries across six continents. It has opened up new payment corridors in North America, Asia, Africa, Europe and South America, and is providing access to better international payment services in markets where remitters have the most need. For example, Remitr and FlutterWave recently established a RippleNet corridor to Nigeria from Canada, which was the first connection on RippleNet in Africa.
In another interesting industry move, it was announced in June 2019 that Ripple will invest up to $50 million in MoneyGram as part of a two year partnership in which the money transfer organisation will use xRapid, that utilises XRP for cross-border payments and foreign exchange settlement.
The partnership builds on a pilot started last year, and will see MoneyGram use XRP in payment flows through Ripple's payment network xRapid in an effort to speed up and cut the cost of transferring money. Both companies share a vision to improve cross-border payments by increasing speed, lowering costs and offering more transparency.
According to Alex Holmes, MoneyGram’s CEO, Ripple’s xRapid product gives MoneyGram “the ability to instantly settle funds from US dollars to destination currencies on a 24/7 basis”. This has the potential to completely revolutionise MoneyGram’s operations and streamline liquidity management.
MoneyGram's decision to enter into such a partnership and explore blockchain technology is in part a response to newer rivals in an increasingly competitive space. In 2018, China’s Ant Financial was blocked from buying MoneyGram, and has instead built its own home-grown cross-border payments service. Of course, as competition hots up, it’s good news for the customer.
Through such partnerships and innovative thinking, Ripple is well placed to revamp payments infrastructure and help to drive remittances into a new decade.
“The payment infrastructure that most people still use today was born in the time before the Internet existed, much less became democratised,” says Light. “Think of AOL and others that all operated in their siloed islands in the early days of the Internet – then along came HTTP and other protocols that truly made the Internet accessible for everyone. The world of payments is heading in the same direction. As the underlying infrastructure improves, that will help democratise payments for everyone. This is what we call the Internet of Value – where value moves as easily as data does.”
Jeremy Light, Ripple’s VP of EU Strategic Accounts, will be providing the opening keynote address at the 2019 IAMTN Global Summit, which takes place in London on 2-3 October. To find out more about the agenda and register, please visit the event website.