The question on every cryptocurrency enthusiast’s mind is when institutional money will enter the market. Big players like Goldman Sachs, JPMorgan, and NASDAQ have already dipped their toes in the pool, but when will complete mainstream integration occur? Ripple’s David Schwartz pitched in on this question at MoneyConf earlier this week.
Ripple provides solutions to banking systems to offer cross-border payment and settlement. Schwartz said that big banks that have not yet adopted Ripple’s solutions are “getting squeezed from both the sides” with smaller players offering competitive solutions and with their regular movement of funds overseas regularly.
“They understand that they have to improve the services that they provide or they’re increasingly going to become less relevant, particularly in international payments.”
He went on to say that delays and costs in current systems are too high. This, in turn, leads to a market where there is a need for fast and cheap transactions. On this, he spoke about xRapid, Ripple’s most advanced payments solution.
Quoting an example of a transaction between USD and Mexican Pesos, he spoke about the speed of the product. In a space of two minutes, USD is sold for XRP in a US exchange that handles USD. These XRPs are then sent on the XRP Ledger to an exchange that uses Mexican Pesos. The second exchange is then commanded to make a payment into the Mexican domestic payment system.
Schwartz referred to a chicken-and-egg problem with the adoption of new technology, where old players are reluctant to get into new technology, and that new technology is not being used because it has not been built on by existing players.
He also said that this product is an easier sell to existing remittance payment providers, as they only need to change their source of liquidity. He mentioned this as an entry point into the market. Bigger banks are more reluctant to change a lot of things for an uncertain outcome.
When asked about where the quoted 60-70% savings came from, Schwartz said that it was comprised of many factors. He mentioned that the hard part in exchanging value in cross-border transactions was dealing with the counterparties and the fees that they charge. In the xRapid product, this “hard part” is a fraction of a penny, as that is the transaction fee on the XRP Ledger.
While he did not mention it, big players in the financial market space stand a lot more to gain from adopting xRapid. The adoption of the solution would mean that liquidity does not have to be sourced from nostro and vostro accounts, which are huge pools of liquidity used in foreign transactions.
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