RIPPLE - The Importance of Speed and Efficiency in Payments

While no one has yet put a figure on how many financial transactions occur globally each year, you can get some idea of volume from the following statistics:

In 2014, there were 13.6 billion MasterCard debit transactions worth $536 billion
In that same year, banks in the UK carried out 427 million transactions
Visa processes an average of 2,000 transactions every second
Safe to say, the number of global financial transactions is enormous, yet the majority happen using dated technology that makes them slow, expensive and unreliable. Sure, that $3 cup of coffee you paid for by waving your phone at a machine is now often instantly charged to your account, but the store owner will pay a fee to your card provider, who in turn is charged by your phone’s app developer.

It’s a middleman’s game and when it comes to cross-border payments, these intermediaries aren’t even that good at playing. In the US, sending money abroad typically takes 3-5 days, costs $42 and has an error rate of at least 5%. With $180 trillion worth of cross-border payments occurring globally every year, that’s a lot of wasted time and money.

The Ripple effect

That’s all about to change. With Ripple, financial institutions can process their customers’ payments anywhere in the world, instantly, reliably and cost effectively. It offers one frictionless experience to send money globally using the power of blockchain.

Making cross-border payments instantaneous and cheaper and reducing the cost of domestic transactions will bring huge benefits to businesses, organizations and individuals.

1. Marketplace companies (and their customers)

Every day, companies like Amazon, Airbnb and Facebook make millions of low value payments to their merchant partners, accommodation hosts and app developers around the world. Making these transactions more efficient will save these businesses money, allow their partners to be paid faster and, ultimately, benefit the consumer with lower prices and better service.

1. Artists and artisans

Musicians, photographers, craftmakers and other creatives currently rely on intermediaries to distribute their creations, such as record labels, art galleries or an online store like Etsy. Singer Imogen Heap has used blockchain to sell her music directly to her fans and simpler, cheaper payments can help create new direct relationships between creatives and their customers.

1. Underbanked markets and people

The potential of many emerging markets is often untapped because they remain hard to access in terms of exchanging payments. Business and individuals currently shut out from commercial banking will benefit from the ability to make fast and effective peer-to-peer transfers. This boost to their economic potential will also enable them to eventually become part of the traditional financial institutions.

1. Governments

In the UK, $3.5 billion of welfare payments are currently overpaid through fraud, claimant or official error. This is why the UK government is trialing blockchain for these payments with the aim of reducing incorrect payments. That’s just one example of how a more efficient payments system will help governments around the world save money, run more effectively and benefit citizens.

1. Innovators

One of the most intriguing possibilities of the Internet of Things is how connected devices will make payments on behalf of their owners. As our vehicles become more connected, they will be able to pay for parking automatically. If self-driving cars became an everyday reality, in-car entertainment services will become more important and people will access music, videos and more on a pay-per-usage basis. However, these micropayments depend on fast and cost-effective processing to be viable.

1. Financial services

According to McKinsey, more efficient cross-border payments will help banks generate $50-60 billion in new value from increased activity, reduced costs and the release of capital. In a 2015 report, Santander InnoVentures stated that “blockchain could generate cost savings in cross-border payments of $15-20 billion per year by 2022”.

Better value for everyone

For these benefits to become a reality, the world must first agree on a collective protocol for everyone to work with, much like HTTP provided the standard that gave us the World Wide Web and the instantaneous transfer of information we now take for granted.

Ripple aims to do just that and is already being adopted by institutions like Santander, Standard Chartered and UBS. From governments and tech giants to musicians and underbanked entrepreneurs, standardizing protocols for blockchains will lead to faster and more efficient payments that benefit everyone.

Get in touch to learn more about using Ripple to make payments faster and more efficient.