Down with Disco (-era Money Movement Technologies)

2018-6-17 12:50

“Instant payments are here! Instant payments are here!”

Beyond a classic Steve Martin reference, the claim of instant payments is humorous in its own way. For while sending money via Venmo and other payment apps might seem instantaneous, it is anything but.

Try transferring money from your Venmo account into your bank account, and note how long it takes.

Given that these transfers are run on traditional settlement systems, it can take anywhere from one to five days for your funds to appear as usable monies in your bank account.

Even the recent Venmo workaround to issue the money as a “refund” to your debit card takes over 30 minutes and incurs an additional fee.

This is because the latest whiz-bang apps must still run on financial infrastructure developed when disco was king. While your platform shoes and velour suits are (hopefully) stashed in a forgotten closet, you are forced to entrust your hard earned money to financial plumbing that is far past its prime.

Modern international payments can no longer rely on disco era technology

Nowhere is this more evident than when sending money internationally. If you absolutely must move money from your bank account in London to your account in New York today, it is faster to pack a suitcase full of cash and take a plane than to send your money electronically.

The reason? Money messaging system SWIFT does not live up to its name. Then again, it’s fair to say it might have lost a step since it debuted in 1974 – the same year Barbara Streisand topped the charts with “The Way We Were.” An apt metaphor for a service that has not kept pace with the technology it means to support.

Modern money movement demands a reinvention of the rails upon which it moves. Imagine money moving between individuals, companies and banks as if it were traveling along a system of roads.

Today, money must navigate a circuitous route of stopovers and layovers on country roads that extract time and money all along the way. Instead, we need to build a “Hyperloop for Money” that enables funds to take a direct, instant route from point A to point B.

To add insult to injury, it’s as if this current money road trip takes place in a pre-cellphone era because you never have visibility of your money until it arrives at its final destination.

That means a wire transfer for that transaction from London to New York could take as many as 10 days to complete and you won’t know if it’s been successful until it appears in New York or is credited back to your account in London because it failed to go through (something that happens more often than payment providers care to admit).

At a time when e-commerce continues to flatten the world, this system of international money movement is simply unsustainable. It forces banks and payment providers to build in days of delay, produce their own liquidity by funding nostro accounts in local currencies on each side of a transaction, and pass along exorbitant costs to their customers. At some point, the realities of this type of settlement will place limits on the transaction it is meant to fund.

Ripple’s blockchain solutions were designed for the internet age

Ripple was designed to solve this problem of international or cross-border transactions. Rather than be limited by borders and currency changes, RippleNet connects all parties in a transaction for one seamless, frictionless experience from start to finish.

It was built for the internet age to deliver access, speed, certainty and savings. And by leveraging the most advanced blockchain technology possible, it is scalable, secure and interoperable.

Ripple’s xCurrent is an enterprise software solution that enables banks to instantly settle cross-border payments with complete visibility throughout. With xCurrent, each party in a transaction can message the other in real-time to confirm payment details, setup and delivery.

It is constructed around an open, neutral protocol – Interledger Protocol (ILP) – so that it can operate across different ledger and network types. Further, it is designed to comply with all bank risk, privacy and compliance requirements.

This makes it easy to fit within a bank’s existing infrastructure, delivering the ultimate benefits of speed, savings and transparency with minimal integration overhead or business disruption.

xCurrent is being used in real world environments by banks around the world today, including those in Asia, the Middle East, Europe, and the Americas.

Ripple also offers xRapid for financial institutions, eliminating the need for nostro accounts using the digital asset XRP. Designed as a fast, reliable, secure and scalable, XRP serves as an intermediary currency to instantly and cheaply change payments into the local or required currency without a separate account.

It enables real-time payments even in emerging markets with low-trading volume on local currencies. xRapid is currently being tested by MoneyGram and other international payment providers.

The ultimate opportunity is for a bank or provider to use XRP in conjunction with Ripple’s enterprise solution to deliver a superior cross-border transaction that is highly efficient, supremely scalable and completely transparent.

By modernizing the world’s payment infrastructure with Ripple, we can avoid patching disco-era technology and instead embrace the true arrival of instant payments.

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