B2B Payments

Distributing Distributed Ledger And Cross-Border Payments

In the continued march to bring international payments to a streamlined process, platform remains key and so does geographic focus.

Ripple, the startup focused on digital ledger technology, said last week that it is linking up with Japan’s SBI Holdings, the financial services arm of SBI Group, in an effort to expand Ripple’s reach through Asia, touching on markets ranging from China to Japan to Taiwan.

The partnership solidifies through a new company to be called SBI Ripple Asia. Through the combination, two initiatives are emphasized: distributed ledger technology and cross-border payments. In the statement that heralded the joint venture, Ripple CEO Chris Larsen said that SBI would help his firm make inroads into Asia, with technology useful across capital markets, cross-border payments and insurance.

In addition, the new company may look to promote XRP, the token that is used on the Ripple system, with an eye on putting XRP to work across SBI’s brokerages.

In an interview with PYMNTS, a spokesperson for Ripple spoke to what Ripple would bring to the table in the venture: Ripple “will contribute our enterprise software, as well our expertise in training sales and engineering teams to implement Ripple’s backend enterprise software into financial institutions.”

With a nod to geography, the spokesperson said: “Asia is a unique market for cross-border payments, which are growing year over year, due in large part to the rapid growth of remittances and other cross-border payments in Asia. Intra-Asia trade flows are expected to surpass intra-Europe trade flows this year, and cross-border transactions make up nearly half of all payment revenues in the region. With this in mind, it’s no surprise that Asian financial institutions are evaluating faster, more interoperable payments solutions.”

Yet, despite the potential in the marketplace, Asia offers some challenges that prove to be unique ones, said the spokesperson. “Asia has a high diversity of currencies,” he said, “and very fragmented infrastructure, which can lead to a high rate of payment failures in today’s antiquated correspondent banking system, even for institutional bank clients. In addition to improving payment speed and cost, a distributed ledger solution like Ripple significantly increases the transparency and likelihood of an international payment reaching its final destination in the first attempt, with two-way communication capabilities that provide better visibility and control over funds.”

In addition, in Ripple’s view, “there is interoperability among diverse languages and currencies. Because there are so many fragmented networks in Asia, it is also typical for a cross-currency transaction to flow in and out of U.S. dollars, creating unnecessary friction, which can be greatly improved by distributed financial technologies.”

Fund flows may present challenges and so do regulations. Regulatory concerns surface over efficiency and infrastructure, as overseers are “actively learning about blockchain technologies,” said the Ripple spokesperson, and the company advocates a “global, cooperative regulatory framework for cross-border payments,” as the combined entity will focus this year on Asia and North America and later in Europe. Referring directly to what a framework might look like further down the road, “we expect that this framework will look similar to that of the 1997 Bonn Declaration for eCommerce — robust, secure and with built-in consumer protections.”

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