With the dramatic changes in the global economy, digital payment services are playing an increasingly important role for people around the world. Today’s crisis shows the need to digitize cash, access, speed, and reliability – especially for those sending money home to their loved ones.
Digitalization has increased rapidly worldwide: in Italy, for example, up to 80%. The global growth of digital payments is also accelerating. E-transactions are up over 40% and digital transfers are on the rise with several payment providers, including Western Union and MoneyGram International.
The digitization of global payments cannot happen soon enough. The underlying infrastructure is isolated and complex, which leads to significant delays and high transaction fees. To speed up this process, financial institutions pre-fund accounts in target currencies. However, this is an expensive endeavor that ties up assets and exposes businesses to currency risk.
More than ever, financial institutions need RippleNet’s On-Demand Liquidity Service (ODL) to enable instant global payments and meet market demand. Sending cash payments requires more working capital and resources than digital payments. Because the XRP for digital assets can be sent directly, instantly, and inexpensively without the need for a central intermediary, XRP eliminates the additional costs associated with sending cash payments and can be used as an alternative to pre-financing. As a bridging instrument in ODL, the higher the liquidity of XRP, the lower the costs and risk of each transaction.
The benefits of ODL in eliminating pre-financing are particularly important in times of crisis due to the risk and increased volatility. In the first few months of the global crisis, currency volatility skyrocketed, with the MXN peso depreciating more than 20% against the USD, for example.
Ripple is able to relieve the stress caused by our customers’ pre-financing and enable consumers to make instant cross-border payments. They see the benefits of ODL as critical to their business – both maintaining and increasing market share.
As the world changes around us, Ripple stays on track. We continue to focus on supporting low value, high frequency payments with ODL – although transaction volume may look different in this new world.
In particular, we’re reducing the focus on large treasury payments, traditionally used to fund businesses and services without real-time transfers, to support single, low-value transactions and to meet the growing need for remittances and SMB payments. This can reduce the overall ODL transaction volume.
Since the advantages of ODL for the future of global payments are so convincing, we assume that companies will support even more transactions than ever before on RippleNet and that new additional connections will be created in the network.
Ripple is well on its way to opening new ODL corridors this year. We are bringing in new customers and working with existing customers to increase ODL volume in key corridors such as USD-MXN, USD-PHP, AUD-USD and PHP, as well as EUR-. USD.
Companies everywhere are adapting to the new “norm”. However, the uncertainty remains constant and Ripple is there for our customers and their customers. People shouldn’t have to worry about sending money overseas. Together, we can ensure that people everywhere continue to have access to these services – instantly, reliably and cheaply.
If you’re a financial institution looking to learn more about RippleNet’s ODL service and its benefits to eliminate the need for pre-funding, we’d like to talk about it.