Ripple bank-to-bank transfers are the way to modernize the world’s financial infrastructure with the possibility of near-instant international transfers.
How can blockchain bank transfers really work?
Ripple as “the first commercially-available remittance service” is powered by its blockchain, Ripple Consensus Ledger (RCL). This is a centralized network run by a group of banks, Global Payments Steering Group (GPSG).
The members of this interbank blockchain group don’t include anyone. It is concluded from some of the world’s biggest banks:
- Bank of America Merrill Lynch,
- Standard Chartered,
- Westpac Banking Corporation,
- And Royal Bank of Canada are just the founding members of the network.
Since then, more and more banks were invited.
They are in charge of creating and maintaining the blockchain rules, like payment transaction rules, formalized standards for activity using Ripple, and other actions that promote implementation of payment capabilities. Leaning on strict rules, standards, and process support it offers banks a low-risk way to start using the technology today.
While it may seem it defies everything blockchain is built for, this common set of standards and protocols is critical when maintaining network’s integrity and security across borders. Let’s not forget that it is meant to serve customers all across the globe.
The GPSG works to define the standards and processes that can bring the industry to a common nominator and scale with the increasing demand. Not an easy job, but for the first interbank group for global payments based on distributed financial technology they are doing it quite impressive. Since now, these banks were able to enable new types of high-volume, low-value global transactions, while reducing the time and cost of settlement.
Are banks using Ripple right now?
It started with a few trials. First, it promised instant-money transfer between Spain and Mexico. Didn’t work quite well. The second attempt was Canada to Germany which took 20 seconds per transfer. Good, but not good enough.
With time it improved its system reaching a duration per transfer of just a few seconds. This is when Thailand’s Siam Commercial Bank and Japan’s SBI Remit agreed to adopt a new inter-payments service over Ripple’s blockchain.
They’re currently using a commercial chain between the two banks, transferring Japanese Yen to Thai Baht, reducing the standard 2 business days required for a transfer to only 2 seconds.
These real-time payments are world changing for customers who depend on the availability of these funds for basic needs. Currently, there are reported approximately $250 million transferred each year.
Siam Commercial Bank is looking to expand Ripple-powered blockchain to transfers between North America, Europe, and Pacific Asia.
Is Ripple on its way to China?
There are rumors claiming that Alibaba has interest for Ripple. This may be network’s road to China. And judging by its size and power towards connectivity, it can break the competition right away. China’s global trades are increasing exponentially which makes faster and cheaper cross-border payments more of a necessity in the future.
They are currently fighting regulation, capital controls, high costs when most of the e-commerce platforms are resellers watching for every penny. A penny which can make the difference between a profitable or bankrupt business.
Ripple already has the vendors support, but its service isn’t about payments, it’s about bank-to-bank transfers. So they don’t need to convince the market, they need to convince the Chinese banks. This is hard because the conservative behavior and the political agenda kicks in when it’s about a relationship with a company from the USA.
Chinese e-commerce companies, like Alibaba, have global ambition and this is where blockchain technology offers so much potential to their structures, but are they influential enough to convince the banking system to adopt the San Francisco-based startup, Ripple?
We’re hoping to see more favorable foreign exchange opportunities as Ripple’s network expands, and once it catches its momentum we can witness a real boost in cross-border transactions.
Will Ripple expand to the customer market too? Don’t know yet, but we’re watching it closely.
Disclaimer: The author does not promote Ripple or any services related to it. Do your own research and invest wisely!