Worldwide banking networks process over 76 billion US dollars of traffic daily. Without this flow, cargo ships stay locked in harbors, workers don't get paid, franchises fall apart. The technology company Ripple from San Francisco promised to change this by using the Bitcoin-powering blockchain technology.
There's just one problem – none of the banks want to use it
It was a good business plan until Ripple joined the exponential growth of cryptocurrencies in late 2017, and its token – XRP – blew up in price by a factor of a whopping 1300%. At that point, XRP jumped to 3rd place, immediately after Bitcoin and Ethereum, thus turning its directors into billionaires. That's due to the fact that the directors still hold 60% of all XRP tokens.
XRP differs from Bitcoin in that XRP has a narrowly defined and very useful purpose: helping banks move money from point A to point B very quickly and even across borders.
The problem is that banks say they have no interest in using XRP. Current and former chairmen of the world's biggest banks – some of which are partnered with Ripple in other aspects – say that they'll never submit the payments of their corporate clients to cryptocurrency.
New Tech to the Rescue
The CEO of Ripple, Brad Garlinghouse, says Ripple is currently working with over 100 banks to change the way they process payments for clients. Whereas the whole system is currently combating transparency and speed, there's a big difference between Ripple as a company and XRP as a token. XRP is at the core of what Ripple does, but the company's main product right now is RippleNet – a competition to SWIFT, the global payment system combining over 11000 financial companies world wide.
In 2012. Ripple created a balanced and decentralized way of doing payments on the blockchain. They wanted XRP to be a big part of this from the get-go and wanted to help banks avoid the expenses involved with tying money to different currencies in accounts of other banks. But banks have issued a resounding no – they cannot use something that has little chance of being approved by regulators. This made Ripple focus on more important and profitable things like RippleNet which tells banks where to send money.
Standard Chartered, which owns part of Ripple, started testing Ripple's technology which allows international payments with a mobile app in mere seconds, and although not a single bank wants to actually use XRP, they're optimistic about the technology.
Ripple not the only one innovating
Challenged by new technology, SWIFT also implemented an upgrade called GPI (Global Payment Innovation) which lets corporations track payments like FedEx tracks packages. SWIFT is known worldwide so GPI is already in use at 36 banks, but they still don't use blockchain technology and rely on good old databases and centralized systems.
On January 11th, Ripple announced a partnership with MoneyGram. Rather than repel bankers and their clients with its volatility, XRP seemed like a good fit for a payment service such as MoneyGram. SWIFT's banking director, Henry Newman, says that such volatility in price additionally complicates things and that solutions like these are just a bigger problem. Garlinghouse defends XRP claiming it won't be adopted by banks but by companies wanting to send large amounts of money in less common currencies.
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