The future of global payments

In the age of the internet, we can send data and information to anybody around the world almost instantly at little cost. But when it comes to payments, the process is usually expensive and time-consuming because the architecture today is an antiquated infrastructure built decades ago.

Ripple, a US-based payment network and currency exchange, wants to solve this problem by utilizing the power of blockchain. On TechCrunch Hangzhou Blockchain Side Stage, Emi Yoshikawa, Director of Joint Venture Partnerships at Ripple, spoke about how Ripple is using blockchain technology to improve the fragmented infrastructure of payments today.

The idea behind Ripple’s Interledger Protocol is that anyone should be able to send money to anywhere in the world instantly at little or no cost and without the need for payer and payee to set up accounts on the same global payment service. The Interledger project aims to ease the friction of global payments by connecting banks and financial services into a single network. For banks and payment providers, Ripple is utilizing XRP, a highly-scalable digital asset that is used on the Ripple network, to reduce costs and improve efficiency for high-volume transfers.

A threat to banks and financial services?

When asked about whether Ripple is seen as a threat to existing banks and financial services, Yoshikawa said their technology is not just about reducing cost, but also about creating new opportunities that was not possible before—creating new types of business, providing greater access to financial services, etc.

“People tend to think that blockchain is a threat to existing financial services, but it’s not always the case,” Yoshikawa said. On the contrary: “We are providing solutions to help banks become better, so they can provide better services to their customers.”

In fact, Ripple is partnering with banks and financial services all around the world. While some do see blockchain technology chipping away traditional banking services’ source of revenue, however, Yoshikawa said, some innovative banks look at this as a way to create a new opportunities. Santander Bank, for example, has chosen to work with Ripple because “they were facing a lot of competition from fintech companies, like TransferWise and Paypal, and their market share in cross-border payment was quickly diminishing.” Realizing that sticking with the existing old technology is no longer an affordable option, Santander is focused on creating new opportunities.

Yoshikawa explains that ease of integration is part of why their services have been gaining traction in the financial industry. The integration process is easier than one would imagine because Ripple is not creating a new infrastructure, rather they are leveraging the existing infrastructure to enable ledgers and banks to talk to each other. For smaller banks, the integration process takes roughly three months. Also, Ripple is not only a technology provider, but they are establishing common rules for banks to use the technology.

Asia—the world’s center for remittance payments

“Low-value high volume use cases including remittances is an area that we’re focused on,” Yoshikawa said. Remittance is an area where there is still a lot of friction.

Yoshikawa believes that Asia is a critical market for Ripple. “Asia is the world’s center for remittance payments,” Yoshikawa said, “there is a lot of money going into Asia and flowing out of Asia as well.” In China’s case, their service can make far-reaching changes to the lives of migrant workers who rely on cross-border transfer services to send money back home. Other areas such as travel-based payments and e-commerce are also on the rise.

“Today’s cross-border industry is dominated by big western banks,” Yoshikawa said, smaller regional banks in Asia are increasingly seeing Ripple’s solution as a way to differentiate themselves and increase their competitiveness.