This is the third post of three in a series on Ripple’s vision and product strategy. You can read the first here and the second post here.
Strategy Two: Solve Liquidity Management with xRapid
Cross-border payments usually involve a currency trade. Financial institutions and corporations generally solve this liquidity need one of two ways today:
- They open bank accounts where they want to send money and pre-fund those accounts with local currency (or via lines of credit) so funds are readily available when they want to make a payment in that country. There’s trillions of dollars trapped in these types of accounts. Much of that is working capital sitting idle.
- They buy FX services from large correspondent banks like Citibank. We mentioned earlier that there are few banks large enough to provide these services so the market isn’t all that competitive and as a result, the “little guy” pays the price!
With xRapid, there’s now a third, faster, far less expensive option.
In its end state, here is how xRapid will work:
- Financial institutions or corporations will initiate a payment through xRapid.
- xRapid sources the most competitive liquidity option across all of the exchanges and third-party market makers it connects.
- Whichever market maker offers the tightest spread takes the sending currency, trades it into XRP, transfers the XRP to the destination (in just a few seconds), trades it into the destination currency and then settles it in the destination account.
This end-to-end flow is instant, seamless and enables FIs to service cross-border payments on an on-demand basis — no more trapped working capital or expensive FX services!
While we’ve talked about this use case for XRP for years, we finally started to see the customer demand last year. (As mentioned, 2017 was a pivotal year in which a lot of people started to embrace the power and potential of not just blockchain technologies, but also digital assets.) The problem was institutional customers needed an easy way to connect with exchanges and market makers — enter xRapid.
We built and launched xRapid in beta late last summer. In just a few months, we’ve built a pipeline of customers. The early adopters of xRapid are mainly payment providers, not banks.
We have publicly announced that Cuallix, MoneyGram, IDT Corporation, and MercuryFX are piloting xRapid, and we expect to announce more throughout 2018. These players move fast, are hungry for a competitive edge and often operate in emerging corridors, where this liquidity pain is most acute.
These customers are signing up to pilot xRapid in beta. Just like the xCurrent pilots, xRapid pilots use real money. We’re working hand-in-hand with these beta customers to prepare xRapid for production payments. Nicolas Palacios, CFO of Cuallix, shared with our team: “We ran the costs on our end and see that this is 1000 percent more efficient than what we’re doing now. The xRapid pilots all went perfectly.”
For xRapid to be ready for production primetime, XRP needs to be highly liquid across many different currencies. And we appreciate that retail speculation plays an important role building liquidity for XRP. We’ve always pledged to support a healthy XRP ecosystem, and there are many players in that healthy ecosystem.
These are the earliest days of any institution using a digital asset in their payment flows to solve a real problem. While no xCurrent customers today use xRapid, we’re increasingly speaking to them about their liquidity challenges and xRapid at their request. Ultimately, banks and payment providers are capitalists. If we can provide a service through xRapid that allows them to offer better services at a better price that attract more customers, and help them grow shareholder value, we believe they’ll do it!
As long as we continue to run xRapid pilots as successful as Cuallix’s, we believe we’ll drive a lot of payments volume through XRP in the years ahead.
Strategy Three: Solve Connection Standardization with xVia
While some FIs process payments, others just want to send payments on behalf of their customers. But to offer global payments, they have to integrate with lots of different networks, platforms and digital wallets. With each connection a bespoke integration, building and maintaining these connections around the world becomes expensive.
Corporations who process lots of cross-border payments face this same problem.
Last summer, we introduced xVia in beta — a set of standard APIs that’ll connect these sending institutions to our growing network of xCurrent and xRapid FIs.
A similar story to xRapid, we’re seeing demand build quickly in our pipeline for xVia with customers like IFX, Currencies Direct and TransferGo already signed and publicly announced.
Our Strategy Remains Consistent. Our Traction Is Real. We Have A Lot of Work Ahead.
Our goal in publishing this series was to address our growing audience of stakeholders and give it to you straight.
While our company strategy has matured over time, it has remained consistent for a number of years now. Let’s recap:
- We’re focused on removing the frictions in cross-border payments.
- We believe financial institutions, fiat currency and governments are here to stay.
- We partner with financial institutions – banks and payment providers – to deploy our products to make cross-border payments instant, certain and low cost.
- Dozens of FIs have signed up to use xCurrent, most of which start with real-money pilots before moving to commercial roll outs and none of which currently use XRP in their payment flows.
- We released xRapid and xVia in beta last summer and have built strong customer pipelines to pilot each. xRapid uses XRP to enable on-demand liquidity. xVia standardizes connections to different FIs across different networks.
- Early adopters of xRapid are payment providers. xCurrent customers are increasingly interested in learning more about xRapid because it further reduces costs.
- The fact that global payments infrastructure hasn’t changed in decades coupled by the regulatory and technical complexity of updating it with brand new technology means that institutional adoption and commercial usage of our products will take time.
- We’re encouraged and impressed by how fast our customers are moving (and they’re only getting faster).
When you zoom out and look at Ripple’s position in the market relative to any other blockchain player, we’re strides ahead. No one else has customers deploying their products commercially. And when you look at XRP’s position relative to other digital assets, we’re pleased we’ve defined a real world problem it solves; it solves it well; and we’ve validated those facts with customers.
It’s important to remember the Internet didn’t change the world in a year or even five years. It took time. It took partnership between Internet businesses, incumbents and governments.
We have a lot of work to do. We’re proud of our team and what we’ve accomplished to date. We have every reason to believe we’ll achieve our mission so long as we stay focused on serving our customers and put one foot in front of the other.