Visionary Financial recently reported that major international banks could soon implement a Ripple-powered payment system. A new report by Credit Suisse could help to give credence to these rumors. The report states that Western Union has been testing XRP Ripple, and it could soon deploy it for cross-border payments.
Potential Game Changer Fueled By Ripple & XRP?
While several financial institutions have been using Ripple products for payment processing, the potential use of Ripple by Western Union would have a huge impact on the global payment system. While the company does not publish any official figures, many experts agree that it controls a huge chunk of all international remittances annually.
In 2019, when the Western Union CEO was questioned about XRP, Hikmet Ersek did not appear to be very enthusiastic about the use of Ripple’s products. However, he said that the company was still working with Ripple and they were comfortable with their existing system.
The Real Benefit Would be in B2B Transfers
The Credit Suisse report notes that one area, which would benefit the most from the use of Ripple, would be B2B transactions, specifically stating that “Cross-border B2B is the most meaningful, medium-term use case for crypto payments.”
In addition, Credit Suisse stated that “Platforms like Ripple have the potential to reduce settlement times ( from days to seconds ) and provide savings ( low bps, but large absolute dollars).”
Thus far, there is no effective solution to cut down the time for B2B transactions. The process is usually complex and it can take days or weeks to complete a single transaction. The existing SWIFT network is inefficient and comes at a high cost. Besides being inefficient, the fees are usually hard to predict and depend on multiple factors such as the payment corridor and the particular bank being used. Besides that, the SWIFT system has a high rate of failure. The Ripple system could reduce the time for each transaction from days to seconds. Additionally, it would be easier to confirm transactions and the rate of failure would be significantly lower.
It notes that the XRP-powered system is not going to have much of an impact on the consumer-to-consumer market (C2C). In this market, companies such as Western Union and Transferwise have already developed great systems that make real-time transfers across international borders possible at only a small fee. It does, however, note that there is a potential for emerging markets to benefit from Ripple and its solutions. For Consumer to Business payments, the report does not see much potential in the medium term.
Following The Competition
Ripple is already working with MoneyGram, a competitor of Western Union. The company invested in MoneyGram and they received some of the shares of the company in return. Thus far, the deal has been working well for both companies and it might be part of the reason Western Union is testing Ripple. They do not want to be left out, in case Ripple ends up revolutionizing the global payment system.
Are Digital Currencies the Future of Payments?
While many large financial firms are opposed to cryptocurrencies such as Bitcoin, they acknowledge the benefits these coins could bring to the payment system. For instance, JP Morgan already discussed a stablecoin, dubbed JPM Coin. Despite the lack of updates on this project, the initiative by JP Morgan proved that this area of finance was going to be crucial in the near future. Since the original hype, nobody has heard much on JPM Coin. As discussed in a previous report, there was potential evidence that JP Morgan could be working with Ripple and Bank of America. Ripple was years ahead of these banks in terms of tech stacks. Until confirmed or denied, many people believe “JPM Coin” resources fell short and that JP Morgan could have very well decided to work with a FinTech company to stay at the forefront.
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