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Ripple's biggest goal is to allow customers to make cross-border payments. Although the price of XRP has slipped 90 percent from its peak a year ago, Ripple claims to have signed an average of two customers a week last year, trying to penetrate legacy software and network activities. that have not changed much in 45 years.
On Tuesday, Ripple announced that it had reached the milestone of 200 customers, a 350% increase in customers sending live payments. Now it is operational in more than 40 countries. Still, it still has a long way to go before it affects global payments, which is dominated by the largest banks in the world.
SWIFT, acronym for the Belgian company InterBank Financial Telecommunications in Belgium, was created by banks in 1973 as a new way of communicating on cross-border payments and the messaging system remains the reference network for over 10,000 member institutions.
Transmission of money between countries can take several days, especially if intermediaries called correspondent banks are involved. Ripple wants to shorten the process in seconds using something similar to the blockchain – the technology of the distributed ledger that supports bitcoin and is being tested by companies from Amazon to J.P. Morgan.
Just like public blockchains, the Ripple network uses advanced cryptography to make sure that transactions are secure. But all parts of the system do not have access to a shared ledger. Unlike cryptocurrency transactions, it can only be seen by those with permission for the network and transactions are not completely anonymous.
Even getting a crumb of Swift's business could be a significant victory. Global payments rose to $ 1.9 trillion in 2017 and is expected to grow to $ 2 trillion by 2020, according to a McKinsey October report. Philip Bruno, a McKinsey partner and co-responsible for his global payment practice, said that mobile telecommunications raised expectations about how quickly money is transferred from one location to another.
"We were able to make payments on the same day much faster with mobile banking services," said Bruno. "Now is this expectation that if I can pay my brother or cousin immediately, when I work, why can not I do the same thing to pay my global supplier?"
Banks will not easily abandon their dominance in cross-border payments. Swift has a global payment initiative to accelerate the flow of information and HSBC is among the partner banks that test Swift's version and blockchain for payments. But as far as is known, not Ripple. The bank's head of innovation, Jeremy Balkin, told CNBC that global banks "have a huge competitive advantage" when it comes to cross-border payments because they have branches and banking relationships all over the world.
Global banks like Citi make "an automatic $ 8 billion on cross-border payments," acknowledged Ripple's Garlinghouse. "I think Citi will be the last customer we will register because he has the highest interest in not changing the status quo."
