When we talk about the internet of value at Ripple, we’re thinking much bigger than just cross-border payments. It’s kind of like amazon with rare books in the early days just this market happens to be a 10 trillion dollar market. Change is behind all great achievements. We are at a historic turning point. It allowed us to go from ideas to space.
You said in the past that you are doing for money what email did for communication. The progress that Ripple’s making for the industry is moving the whole revolution forward. There’s trillions of dollars parked around the world. Big time move in XRP. Is there a possibility that Ripple could take over swift one day?
From the beginning of time each passing age has left behind some vital knowledge improving its earlier marvels and developing newer miracles. We are living in the age of disruption. Times of change not seen in generations. Companies like Uber, Netflix Amazon and all other game-changing technologies have disrupted their respective industries. So after all the major industries have changed it was time for the king of industries to be disrupted. Let’s face it physical money is becoming like this.
Relics of a different age and soon will only be found in places like this in other words hard cash is disappearing, it’s becoming digital, transferred by things like these. Today we can send and receive information instantly yet the same can’t be said when it comes to sending money. We’re still stuck in the past.
Due to the ongoing global pandemic which continues to force many businesses into the digital realm real-time payments are becoming more important than ever. This is a trillion dollar problem.
We all know what this is it’s money and people like you use money every day. As a concept money is not meant to remain static. Money serves its purpose only when it moves from one hand to another and from one place to another. The concept of exchange of value has evolved over time. From clay tokens to metal coins to paper notes and cryptocurrencies each new form aiming to eliminate the downfalls of its predecessors.
International money transfers have also evolved over time with the changing shape of money and breakthroughs in technology. The last 150 years show us an evolution in the money transfer industry yet there still hasn’t been a dramatic change in the global payment landscape as much as the rise in payment volumes demands. As long as there’s money we’ll have banks to handle and service it. I figure both are going to be around for a long time. In 1973, 239 banks from 15 countries got together to solve the problem of cross-border payments.
The banks formed a faster alternative to Telex messages called SWIFT.
What is Swift? Swift is a private financial messaging service that’s based in belgium and what that means is it facilitates the international financial transactions of most of the world. There are a bunch of different systems like swift but swift is by far the most popular. It serves 11 000 financial institutions in over 200 countries and basically when anyone wants to buy or sell something internationally swift is the one that takes the payment information or the destination that the money is going to and make sure that money reaches the right place in a secure fashion and this replaced the telex system which was basically swift before swift and this system did the same thing but it was much slower and it didn’t have a standardized universal code system like swift does so swift was kind of an improvement on this outdated system.
So if you’ve ever made a bank transfer you were probably using swift although it plays a crucial role in international money transfer swift does not actually move money their network sends messages between banks that allow them to make transfers it handles more than 5 trillion dollars worth of transactions every single day that’s a market worth more than a quadrillion dollars annually with swift the transactions are fast but settlements happen much later they average a three-day waiting period with a seven percent failure rate and are very costly to execute reuters citing an interview with the head of global security for swift in which that official says that since the famous bank of bangladesh hacking incident earlier this year there have been a meaningful number of other attacks on client banks that is banks that use the swiss financial messaging system he’s also saying that about a fifth of those hacking attempts have resulted in stolen funds that’s according to. At the end of the day we’re talking about a system that was created 50 years ago a settlement time of 48 hours might have been great in the 70s but in 2020 we’re in need of a better solution. It’s time for a new standard.
You said in the past that you are doing for money what email did for communication do you think this is really going to take off to that extent? You know we do we when we look at the world you see a world completely connected on an information web but what we don’t have is the sense of a value web payments the exchange of value is still pre-internet based on 40 year old technology and so that’s very expensive that really slows e-commerce lots of parts of the world don’t have the ability to make payments so this new technology that really is a second gen of bitcoin enables now value to be exchanged in the same way that information is currently exchanged and that’s a big deal we think.
If you replace swift messages with a digital asset that moves faster than the message you get near real-time money settlements there’s no nostro accounts just value moving at the speed of data.
We found this very interesting tech company called Ripple that we’re going to invest in. right okay what is ripple? so ripple is basically a platform to allow people to transfer money from bank account to bank account person to person really securely really simply really quickly and it runs on this stuff called XRP which is a cryptocurrency but basically it’s just a way to get value from here to there on behalf of ripple we’d like to give you four million dollars usually people come out with the big giant check and do the like big giant check thing but we can actually transfer it into rwandan frank’s right now right here and all we have to do is push this button and it’s in your account do you want to push it you want me to push i would like to push it bingo thank you thank you ripple for doing this and now everybody knows how to you can just send money easily like that what a great thing. Much like netflix destroyed blockbuster and uber destroyed the taxi industry this is the biggest transformation in the structure of how humans exchange value since the dawn of the internet.
Ripple is the company that’s aiming to make money move as fast as information but it’s their digital asset XRP that’s holding the real key to the global payment puzzle one example is ripple it’s a platform used to make international monetary transactions faster and cheaper now one way ripple facilitates that is by using the cryptocurrency XRP I asked CEO Brad Garlinghouse to explain what XRP actually is and how it all works XRP is like a bitcoin it’s a digital asset what we do is we take a transaction between banks and instead of having a bank pre-fund an account at the other bank which is how correspondent banking works today the bank of Brad in dollars would pre-fund the bank of Julia perhaps in pounds and then i would debit and credit that but that means i have to pre-fund and have dormant capital sitting at that other bank what we allow banks to do allow our payment providers to do is to tap into the liquidity of XRP liquidity so today there’s lots of liquidity between XRP and U.S dollar there’s lots liquidity to XRP and british pound and we could tap into that to move value in real time in seconds.
XRP is meant to be a digital way to move value to move digital money if you will and it’s really focused on that so there are other cryptocurrencies ether as an example of something that they can do all kinds of stuff including move value some people in the industry look at that and say why is ether so slow to close the transaction well maybe because it’s trying to do too much or just trying to do so much or it can do so much XRP is purely focused on value it can do you know VISA like 1500 transactions per second we don’t have digital value right now you know when you send someone a Venmo payment they don’t actually get the money for like three to five days they might credit an account but there’s risks being taken by the company there and that’s why the fees are so high when our one of our customers uses XRP to move money from Thailand to Spain it happens in less than a minute or two and it’s very accurate and quick to do so.
In fact XRP was the best performing asset in 2017’s crypto bull market. Ripple is on a mission to make money more accessible to people all around the world it’s a hot new cryptocurrency and it’s blowing up take a look at this it is a big time move in XRP so is Ripple the next big breakout coin and if so how do you even buy it we’ll walk you through how to buy it now so Ripple has been on an absolute tear where XRP and Ripple have focused is really being a real world use case and solving a real problem and i think as the market has recognized the traction we’re seeing with banks the market has responded and the price of XRP is up as as mentioned earlier about four thousand percent.
four thousand percent that’s a pretty incredible number what a rally this been for these big three XRP enjoying gains of 186%. Thank you Ripple. XRP’s main function is to serve as a bridge asset between currencies so why should banks care? As of today trillions of dollars are stuck with banks waiting to be used for payments when one bank needs to send money across borders it uses the dead cash it’s holding at the foreign institution to which it is sending funds to the whole process involves counterparty risk and the expensive betting procedures that goes along with it as you know today banks when they fund they keep nostro accounts with other institutions and we estimate there is about five to ten trillion dollars stuck of depositors money that’s lying elsewhere around the world with capital risk depreciation risk and all the things that go with it and that’s the reason remittances are too expensive but if you use cryptos to do just-in-time settlement that five to ten trillion dollars can come back home reducing the cost for financial institutions which in turns can make remittances cheaper. To solve this Ripple is using XRP to provide banks with liquidity on demand we have a product which is called on-demand liquidity and better than pre-funding in the destination country you can source on demand liquidity so imagine you are a payment service provider you want to send hundred dollars to Mexico and you use actually our native digital asset which is called XRP as a bridge currency between the two fiat currencies so changing from USD to XRP and immediately after to mexican peso this is really revolutionizing actually the way that the money is handled.
XRP is perfect for this because the average transaction costs a mere $0.00003 of a penny and is confirmed within 3 seconds in addition the ripple ledger can process more than a thousand transactions per second we use XRP because it’s a thousand times faster than bitcoin transactions a thousand times cheaper than a bitcoin transaction we think the utility of XRP is such that it’s the most efficient digital assets to solve this problem there’s trillions of dollars parked around the world pre-funded between banks between corporates if we can make those trillions of dollars more efficient we make the entire global financial ecosystem more efficient. If we can deliver a better product for a better price banks and other financial institutions will get on board.
With XRP banks will essentially have gold that you can teleport into any vault in the world instantly. XRP is a fantastic currency to use for among other things hedge funds we need to move a lot of money very quickly we make investments all over the world our lps come from all over the world and using banks to move money is a pain i mean it takes a day or two to move money around the world and with XRP our very first close was 50 million we moved that money and and i’m not kidding you in like three seconds and i think it costs 20 or 30 cents that’s.
.. you really need to think about that. Their technology has essentially solved payments I got it. It’s the difference between a horse and buggy and a Tesla.
And i’d never heard of Ripple at the time and i thought they said swift is going to be put out of business by ripple and i thought that’s quite handy i’ll phone up swift and see what they think that’ll make a good story for the paper and swift said actually we’re taking this really seriously we think it could affect us in lots of ways.
Is there a possibility that ripple could take over swift one day? Well i think what we’re doing and executing a day-by-day basis is in fact taking over swift you know we’ve now signed up well over 100 banks some of the largest swift enabled banks in the world are now using ripple’s technology just last week we saw a remittance company who’s using ripples technology they reduced the price per transaction to their consumers from twenty dollars per transaction to two dollars per transaction and they saw an 800% increase in usage overnight that’s the type of dynamic that swift isn’t able to support that we’re able to address right now. In short swift is slow and expensive XRP is fast and cheaper to use but it’s not just about speed XRP is attempting to take over all retail transactions and international money transfers. Trillions of dollars of dormant capital will be released once ripple replaces swift.
Again to tell you a story three years ago we actually experimented with 12 banks across different geographies who did not have pre-funding relationship with each other we gave them a bunch of digital asset called XRP and asked them to use it to see if it works for cross-border payments as a bridge currency they came back to us after six months and they said look it works beautifully but we cannot use this and there are two issues with with this number one it’s highly volatile so we cannot use it number two my regulator will never allow me to use this there is no risk weighting to this and it’s too volatile there is no way the central banks will allow me to use this this was in 2015-16.
So we went back to the drawing board and came out with a new product as i mentioned ODL on demand liquidity and basically what that product does is through that product banks do not have to hold a digital asset on their books they could leverage that product connect with a digital asset exchange which mind you is fully fully licensed and supervised and then leverage that exchange to source liquidity in real time and because the entire transaction happens in less than 30 seconds because of the speed of the the ledger the volatility risk is taken care of so we removed the two big concerns that banks and payment providers had and almost productized it in a way and then we launched the product last year in october.
You see the hard part about getting banks to use a blockchain isn’t the blockchain. It’s everything else governance compliance integration with banking systems and so on ripple has been making the right moves with the IMF, central banks, authorities and regulators all around the world. We don’t think governments are going away we don’t think banks are going away we don’t think fiat currency is going away but we still think there’s a role for digital assets to play in reducing friction and accelerating the speed and reducing cost associated payments so when i started to talk to Chris Larson they were recruiting to hire somebody as a CO being a bitcoin enthusiast or crypto enthusiast married with i thought a very pragmatic vision of how you actually bring this forward and revolutions rarely happen by going to the end point first instead it’s you know it’s i use the expression internally about crawl walk run yeah you gotta crawl before you walk before you run and i think the progress Ripple’s making for the industry is moving the whole revolution forward.
Right now Ripple’s XRP powered cross-border payment product on-demand liquidity is moving nearly 10 percent of the remittance volume from the us to mexico three billion dollars worth of value to be exact and that’s just one payment corridor that Ripple is targeting one of the things that we’re seeing at Bitso and it’s very interesting is that we used to dream about doing cross-border payments or emittances and this used to be only a vision and we’re starting to see that really happening if we analyze what we’re doing on a weekly basis today we are at 1.5% of the remittance corridor between the u.s and mexico which is the largest corridor in the world with 35 billion dollars a year so if you think that’s 1.5% which is nothing but it’s amazing in the dimension of what we’re talking about the opportunity it can blow our minds.
Now why is this significant?
Because we are talking about just one currency pair corridor out of potentially tens of thousands. With more than five trillion dollars worth of transactions transferred just by swift alone in a single day we’re looking at at a quadrillion dollar market annually that being said as it stands today there aren’t enough XRP in the world at the current price to facilitate the global demand that money transfer requires so if XRP is to replace institutional and retail financial systems it needs to have a much higher price in other words the price of XRP has to be higher to increase its liquidity in theory in order for XRP to move value equivalent to swift’s 5 trillion dollars a day the price would have to be around $100 per XRP and that’s just swift since Ripple XRP has essentially solved payments almost everything will eventually fall into their system in one way or another new companies like Amazon and Uber need a seamless global experience they don’t want to integrate with a new API or three different mobile payment companies in every country that they want to communicate with they need fast payments it might seem crazy at first but just imagine if XRP captures just 10 percent of the market within the next few years the sky is truly the limit.
The next question is how do we get there? As ripple captures more of the market and continues to drive the use of on-demand liquidity the price of XRP will slowly rise to meet the demand due to the rising volumes of transfers once enough currency pair corridors and volume is flowing through the system there won’t be enough XRP in the world to facilitate global demand at current prices therefore price will need to rise to meet that demand if ripple has its way it will do more than knockout swift it will have found a way to make money move like information instantly. I have to say this year’s been interesting the rise of digital payments anyway due to covid some big investors throwing the towel in and saying fine i was a skeptic i’ve changed my mind Square, Paypal getting involved.
I want to hone in on the evolution of what i see going on at Ripple and you can correct me if i’m wrong we’ve seen some management changes but i also see sort of the building of a facility that plugs directly into exchanges sourcing liquidity rebalancing payment flows globally yeah absolutely and to your point our vision really is how do we make this plug and play as simple as possible to plug in and take advantage of global liquidity across the XRP ecosystem it is so clear to me more than ever that XRP’s speed its scalability it’s incredibly low cost per transaction dynamics make it perfectly suited for the problem we are solving with it and again we’re seeing that the community behind XRP the other use cases we’re seeing that grow every week.
Fast forward two years where’s Ripple? If you made it to the end of this video let me know in the comments if you’re bullish or bearish on xrp in 2021. Also make sure you subscribe and like this video thanks for watching and i’ll talk to you later..