XRP, the native currency of the XRP Ledger created by Ripple, is making a significant impact in the world of large financial institutions by providing a novel and creative method for cross-border payments.
Its fast transaction times, low fees, and strong network impact has made XRP a favorite among companies looking to simplify their payment processes and transfer money globally.
This article delves into the crucial benefits that XRP brings to businesses and how it is revolutionizing the way companies approach international money transfers.
With its reliability and ease of use, XRP provides a compelling option for businesses seeking to enhance their payment systems.
A short history of Ripple
The origin of Ripple can be traced back to Vancouver, Canada, in 2004 under the name RipplePay. The purpose of the company, founded by Ryan Fugger, was to provide a secure method for transferring money globally.
In 2012, ownership of the company was transferred to Jed McCaleb, Arthur Britto, and David Schwartz, who transformed RipplePay into a digital currency network renamed as OpenCoin.
Jed McCaleb, previously the founder of the failed Mt. Gox cryptocurrency exchange, eventually left Ripple and created Stellar in 2013.
Subsequently, the company underwent another rebranding in 2013, becoming Ripple Labs. Finally, in 2015, it was simplified to its current name, Ripple.
What is XRP?
XRP is a digital currency created by the financial technology company Ripple. Its objective is to make cross-border money transfers between individuals, institutions, and corporations quick and cost-effective.
XRP functions as a digital asset and acts as a link between different fiat currencies, thereby allowing for smooth transactions without the need for a central exchange or major financial institutions.
Additionally, it lessens the cost and time required for cross-border payments as compared to traditional methods. With its efficiency and stability, XRP is considered a more appealing option for businesses seeking to simplify their payment processes in comparison to other cryptocurrencies.
What are the benefits of using XRP for your business?
Trustworthy Network
With a network of 150 validators spread across the world, XRP operates on RippleNet, a platform that offers high reliability and stability. This feature has made it a preferred choice among leading financial institutions globally.
Low-Cost Transactions
The Ripple blockchain uses “drops” as a unit of measurement for XRP transactions, making them low-cost and easily accessible.
Scalable Infrastructure
Ripple can handle a large number of transactions per second, similar to popular payment processors like VISA, making it a suitable option for fintech companies that need a strong infrastructure and a quality crypto payment gateway. Unlike other classic blockchain systems, which are limited in their processing capacity, Ripple is capable of handling a high volume of transactions.
Speedy Transactions
The Bitcoin network has a slow transaction time, causing many users to shy away from using it. The integration of blockchain technology can also lead to a poor user experience due to long wait times for transactions to be processed.
XRP, however, offers quick transactions as the ledger processes transactions in just 3-5 seconds, much faster than the average time for Bitcoin transaction confirmations, which can take over 20 minutes.
Eco-Friendly
With an increasing focus on sustainability, companies are looking for ways to reduce energy consumption and lower their carbon footprint. Some regions even require sustainability compliance.
Unlike other blockchain networks and Bitcoin transactions, XRP does not require intensive computing resources for mining, allowing its nodes to operate efficiently and with minimal energy consumption. This results in significantly lower energy usage compared to a conventional blockchain network.
What’s the difference between Ripple and XRP?
It is common for people to mix up Ripple and XRP, but they are not the same thing.
XRP is a digital asset, while Ripple is a for-profit organization that promotes and develops XRP, the technology behind it, and other transaction-focused projects.
Ripple’s main focus is to create technology that enhances the utility of XRP and revolutionizes global payments, while other financial institutions are exploring other potential uses for XRP.
Ripple Labs was established in 2012 under the name OpenCoin and went through several rebranding efforts before settling on the name Ripple in 2015.
XRP, on the other hand, was created as part of the Ripple Open Payments System and was later renamed to the XRP Ledger. Ripple portrays XRP as faster, less expensive, and more scalable than any other digital asset and uses the ledger to power its payment solutions.
Use cases of XRP
On-demand Liquidity
XRP is a cryptocurrency used by Ripple Network users as a source of international liquidity. The use of XRP provides “On-Demand Liquidity” to banks. In a traditional payment settlement system, the receiving bank is paid before the actual settlement occurs, which often takes 2-3 days.
The XRP system enables faster, real-time settlement and reduces the need for intermediaries.
Cross-border Payments
The cross-border payment process can be streamlined by using XRP as a bridge currency to process transactions globally.
This method eliminates the need for intermediaries and reduces the risk of currency fluctuations during transfers. XRP enables real-time settlement between parties who may have different native currencies.
To establish trust between two parties seeking to make a transaction, Ripple uses a link known as a gateway. The gateway functions as the credit intermediary that transmits and receives various currencies to public addresses through the Ripple network.
Banks that leverage Ripple XRP in their payment system
Ripple XRP is a well-regarded trading platform that has been embraced by many major banks across the globe.
Although a comprehensive list of other institutions that utilize Ripple XRP is beyond the scope of this article, here are a few of the major players in the industry that have integrated XRP into their systems.
Bank of America (BofA) and Ripple Partnership
Bank of America, a leading financial institution ranked 2nd largest in the US and among the top 10 globally, has a long-standing partnership with Ripple. The partnership, which was made official in 2020, saw BofA executives involved in establishing the compliance standards for international payments on RippleNet. BofA holds a crucial role in ensuring the legal and operational consistency of Ripple XRP.
Standard Chartered Bank and Ripple Collaboration
Standard Chartered Bank, a UK-based financial institution, joined forces with Ripple in 2016. This partnership enabled the bank to offer payment services to its customers in over 50 countries and become one of the largest banks on the RippleNet network. The bank’s use of XRP has allowed it to increase its presence in key trade corridors, such as between Singapore and India.
Santander Bank and Ripple Integration
Santander Bank, a subsidiary of Santander Group in Spain, mainly serving the Northeastern US, integrated Ripple technology in 2018. This allowed the bank to launch the One-FX service, providing cross-border payment capabilities between US and EU customers.
Siam Commercial Bank (SCB) and Ripple Partnership
Thailand’s Siam Commercial Bank (SCB) adopted Ripple in 2020 for its SCB Easy cross-border payment solution. This service allows for remittances to be made to 12 countries worldwide.
