Ripple xRapid pilot results show savings up to 70% for institutions
Ripple's xRapid results show the sheer efficiency of digital currency, and the sheer inefficiency of fiat.
The current international payments system is simply unacceptable, Ripple representatives have said on multiple occasions. Ripple's announcement of the first pilot results for the xRapid system opens in a similar vein, pointing out that we can stream live video from the space station but it still takes days to settle an international payment.
Ripple's xRapid results have found savings of 40% to 70% compared to the typically-employed foreign exchange brokers, and an average payment time of two minutes compared to two or three days.
It's hard to say whether these advantages are more about the sheer inefficiency of existing systems or the benefits of Ripple in particular.
"For payments in the critical remittance corridor between the U.S. and Mexico, financial institutions using xRapid saw a savings of 40-70 percent compared to what they normally pay foreign exchange brokers," Ripple says. "An average xRapid payment took just over two minutes, compared to today’s average of two to three days when sending cross-border payments. The portion of the transfer that relies on the XRP Ledger takes two to three seconds, with the additional processing time attributed to movement across the intermediary digital asset exchanges and local payment rails."
An xRapid payment starts with a financial institution connecting directly to a digital asset exchange in both the origin and the destination. The originating currency is then converted to Ripple XRP, which then gets digitally transferred across the border, and then converted into the destination currency at the destination exchange.
From here, the funds are sent out on the local rails of the destination country to be paid out. The payment is tracked the entire way, with the final result being a quick, efficient and safe cross border payment. The digital transfer takes several seconds, while the remaining couple of minutes are the time taken to send the fiat current payment along local rails.
The speed of the transfer goes a long way towards offsetting the volatility of XRP. Cryptocurrency is volatile, but generally not so volatile that it will shift abruptly in the space of a couple of seconds. And generally there might not be troubles with setting the price on both exchanges simultaneously to ensure the amount of money that's sent is also the amount of money that arrives.
Other than navigating international regulations, the main problem for Ripple might be that this system doesn't necessarily rely on XRP. Other than because of Ripple's existing partnerships and networks, there might be little reason why the same system can't be set up with any other equally cheap and efficient cryptocurrency.
Disclosure: At the time of writing the author holds ETH, IOTA, ICX, VEN, XLM, BTC, NANO
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