Evolving RippleNet for a Tokenized Future

Today, crypto and blockchain are more mainstream than ever. On every major news outlet there is a daily mention of crypto or a discussion of how crypto markets are faring, and it’s even gone primetime on SNL. There’s a palpable level of excitement for crypto that isn’t showing signs of slowing down – tokenization is here to stay.

It’s estimated that at least 46 million Americans own crypto today, and many other countries are adopting this tech at higher rates. Major companies like Square, Robinhood, Visa, Mastercard and PayPal are firmly integrating crypto into their product stacks. World-famous DJs are offering exclusive NFTs to their global audiences. Even central banks are jumping head first to the potential of crypto – about 80% of central banks are exploring use cases involving central bank digital currencies (CBDCs), with 40% already testing proof-of-concept programs. Last month, El Salvador became the first country to adopt bitcoin as legal tender and in the U.S., Miami is taking action to make the city a hub for crypto. 

Since Ripple’s inception, we have understood the potential of crypto to transform the financial system – from changing the way money moves across the globe through near-instant payment settlement to the way we borrow and loan money through DeFi platforms. 

Back in 2012 when Ripple first launched, crypto and blockchain largely lacked the infrastructure, liquidity, and trust needed for adoption. There were only a few exchanges at that time doing a few million dollars a year in volume compared to traditional exchanges like Nasdaq with about 5 billion dollars in volume per day. Fast forward to today, there are hundreds of exchanges around the world doing billions in volume every day. 

With this increase in adoption, there’s a growing need for tokenization, the use of digital tokens to represent ownership of any type of asset (physical or not) on a blockchain. Tokenization is transforming how people buy, sell, track and manage assets – everything from art and real estate to intellectual property, equities and supply chain goods. In fact, the World Economic Forum projects 10% of the world’s GDP will be tokenized by 2027. With our years of experience working with Financial Institutions (FIs) on using blockchain-based technologies, Ripple is uniquely positioned to partner with enterprises for that future. There’s no question – those who don’t embrace these new technologies will be left behind. 

Preparing the Enterprise for the Crypto Future 

Ripple is evolving. We’re expanding from a cross-border payments network to a platform providing tokenized services that will bring crypto capabilities to the enterprise and prepare them for a future where crypto is front and center. RippleNet was initially built to solve the challenges with speed, cost and transparency in cross-border payments for those that have been grossly underserved by the financial system at large. 

On average the fee for consumers to send money across borders is 7% or a $14 fee to send $200. Similarly, small and medium-sized enterprises (SMEs) experience exorbitant costs as well as high expectations from their customers. With fewer banks extending capital to SMEs since the 2008 financial crisis, these businesses have trouble getting credit to supplement their already limited working capital (around 70% of SMEs in emerging markets lack access to credit, according to the World Bank). Furthermore, delayed payments to overseas suppliers, employees or other critical partners can be very damaging to these businesses.

With RippleNet, payment service providers and mid-size banks have a better way to compete and don’t have to pay huge fees that inevitably get passed down to their customers and don’t need to wait days for payments to be delivered. 

On-Demand Liquidity (ODL), eliminates the need for pre-funding–in cross-border payments by using XRP as a bridge between two currencies. As the first movers started using the product, it became clear that the businesses that would find the most value would be the PSPs and the digital-first banks – they are the ones specializing in remittance, e-commerce and SME type payments – high volume, low value–that mid to large banks have long ignored. ODL is fulfilling a real need today – ODL volume accounted for $2.4B in notional value on RippleNet in 2020. 

In October 2020, we introduced Line of Credit, an extension of ODL which allows RippleNet customers to source capital on-demand to initiate cross-border payments at scale using XRP. Unlike incumbents who have large balance sheets that allow them to scale their business quickly, many fintechs and small and medium-sized enterprises (SMEs) lack the capital and resources to compete. Before switching to RippleNet they didn’t have access to the same services as traditional FIs and were overcharged for legacy systems – sometimes even resorting to costly VC money to fund payment flows. We’re constantly building to meet the needs of our current and future customers. 

It All Starts with a Wallet 

As customers were ready to move from fiat only to crypto-enabled flows, we were easily able to add new services and capabilities like ODL and Line of Credit. In the future, every customer will join RippleNet with the same base service and a wallet designed to support both crypto and fiat. By adopting the wallet, customers are now ready to take advantage of the latest blockchain-enabled solutions that keep them at the cutting-edge – the platform is designed to seamlessly upgrade and add new services as customers want them. In the future, customers can use their Ripple-enabled wallet to custody XRP, BTC, stablecoins, and anything that’s tokenized. 

We saw the idea of taking a platform that can be built upon work brilliantly with Cisco starting back in the 80s – they first brought networking into the enterprise, and subsequently were perfectly positioned when the internet started to take off to easily build on that foundation, bringing customers other services like security tools and collaboration software. We are doing the same with RippleNet. Customers choose to work with Ripple because we are a trusted source in enterprise crypto that will help them to grow and scale their business.

When we launched ODL commercially in 2018, the payment flow required payments to be originated in fiat, converted to XRP and then again converted to fiat currency in the destination country. Over the years, we’ve refined ODL, streamlining the product to improve efficiency and experience. Today, ODL customers can send XRP for cross-border payments directly through a crypto wallet. They can leverage their wallet to source XRP on-demand instead of having to source it through a third party. This gives more flexibility and choice to customers while reducing friction in the payment flow. It also gives our customers the ability to grow and scale quickly with new partners and currencies, by simplifying the onboarding process and enabling multiple currencies through a single wallet. 

FlashFX, an innovative payments technology company based in Australia, was founded on the belief that smart technology is the key to unlocking the potential of global payments. They are constantly looking for new ways to integrate cutting-edge technology to bring their customers the most innovative services. As a longstanding ODL customer, FlashFX is one of the first to connect to a customer leveraging Ripple’s new ODL model. As such, they’re now able to support payments in GBP – a currency ODL didn’t support previously – as well as EUR payments. FlashFX is just one customer growing their business with Ripple’s products. 

This comes on the heels of incredible global momentum for Ripple. The APAC region especially is exploding with growth and opportunity thanks to progressive crypto regulation and innovative companies looking to jump on the chance to lead in the crypto space. For Ripple, we’re seeing some of our largest growth volume here. Southeast Asia transactions grew by 10x in 2020, driven by existing RippleNet customers and new connections. 

New customers like Novatti joined Ripple’s global payment network, using ODL to enable payments from Australia to the Philippines, and we acquired 40% of Asia’s leading cross-border payments specialist Tranglo to accelerate the expansion of ODL and Line of Credit in the region. As more enterprises want to add crypto-enabled services, customers like Novatti and Tranglo play a vital role on the network as fiat on and off-ramps. 

Today, it’s a matter of when, not if, crypto will play an integral role in the future of financial services. This industry has moved full speed ahead for the past decade and it’s only speeding up. The future belongs to those to build bridges between the traditional financial world and the new paradigm of crypto and blockchain technologies. 

If you’re a financial institution looking for a competitive advantage to drive the growth of your business through crypto, contact us today. We’re also hiring for a number of roles – check out our job openings. 

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