A new report from the Malaysia and Singapore-based business outlet Edge Markets says Ripple is set to revolutionize the world of cross-border payments.
According to the report, Ripple’s XRP-based software solution xRapid is set to challenge the global banking network Swift by targeting emerging markets, where it’s transfers are often especially slow and expensive.
“From the perspective of big financial institutions, better liquidity is a key advantage. Payments, especially to parties in emerging markets, often require pre-funded local currency accounts around the world, resulting in high liquidity costs. With xRapid, payment providers and financial institutions are able to dramatically lower the capital requirements for liquidity, as it uses the XRP token to provide on-demand liquidity.”
The report highlights research from McKinsey & Company, which found that fintech companies are having a transformative impact on the cross-border payments status quo.
“McKinsey believes constant development in the open banking and e-commerce ecosystem will fuel significant disruption in the coming years. Thus, financial institutions have no choice but to jump on the fintech bandwagon.”
According to Ripple’s chief market strategist Cory Johnson, the speed and reliability of xRapid is only part of the equation.
“A single transaction on xRapid takes only a few seconds to complete, regardless of the origin or desigination of the fund. Transaction fees are significantly lower as well, says Ripple’s Cory Johnson. ‘Using Ripple software, you are exposed to XRP for just mere seconds and, in that few seconds, the volatility is very small, compared with traditional remittance, where the money [would be held] for days, thus exposing it to the possibility of volatility for a longer period.'”
Swift, the Belgium-based network that facilitates cross-border payments for 11,000 financial institutions in over 200 countries, is working to improve its technology. The payments giant is launching a major update to its correspondent banking system, which the report calls “relatively ancient.”
“To be sure, Swift, the incumbent, is not standing still. On September 12, 2018, it introduced a pre-validation service, which relies on secure application programming interfaces (APIs), predictive analysis and artificial intelligence, allowing its customers to detect and resolve errors that delay payment messages before they are dispatched and enabling banks to provide upfront fee transparency to their end-customers.”
You can check out the full report here.