One of the core sectors that blockchain technology has been enhancing is the remittance system. The traditional cross-border payments system is a thing of the past now as blockchain makes the process cheaper and quicker. Among the thousands of cryptocurrencies that are facilitating a remittance service, Ripple is the most popular.
Ripple has been revolutionizing the remittance system with its fast transactions and cheaper fees. Its On-Demand Liquidity (ODL) product, which was previously known as xRapid, has been a huge success. ODL leverages XRP as a bridge between two different currencies and thus eliminating the need for any kind of pre-funding.
ODL has seen a lot of customer interest over the last year. The new payments system has been adopted by many businesses and banks due to the enhancement it provides. Moneygram, the global money transfer giant has been implementing Ripple’s ODL in their daily operations since June 2019. Since then its use has grown to handle 10% of MoneyGram’s total transaction volume between the United States and Mexico.
Nicholas Steiger, CEO of Australian remittance company FlashFX had said that implementing ODL has allowed FlashFX to meet customer demands by providing a newer payments service. He said:
“It’s been a long road for digital assets, but the end customer doesn’t necessarily need, or want, to know how their transactions are being handled in the back end. They want the transparency, low-cost and above all else, speed of transactions.”
Recently Ripple CEO Brad Garlinghouse has revealed his vision of replacing the traditional cross-border payments system with XRP’s ODL product.
In an interview with Jay Kim at the Swell conference in Singapore, Garlinghouse was seen criticizing the modern-day global payments system as he called it “four or five decades old.” He went on to explain how On-Demand Liquidity is designed to replace the current payment model over time.
The ODL would deploy a $2 trillion pool of liquidity to reduce transfer costs. He goes on to explain that ODL will eliminate the need for banks to hold liquid cash to enable cross-border transfers. Ripple’s product will supposedly eliminate one – fifth of the burden on banks. Garlinghouse considers XRP to be the oil that helps the ODL engine run, he elaborated:
“There’s $10 trillion pre-funded in accounts around the world, which is effectively the oil that is facilitating the engine that is correspondent banking. The oil has to be there or correspondent banking won’t work. Now, if we can reduce the amount of oil that improves the efficiency of the global economy. So we feel like, bit by bit, we’re going to be able to take that $10 trillion down to $9 trillion, to $8 trillion. This is a journey that will take many years. But we’re incredibly enthused by the progress we’ve made in a relatively short amount of time.”
ODL can process 1500 transactions per second and helps banks move money across borders by leveraging the speed and cost benefits of cryptocurrencies. With the widespread acceptance it is gaining, ODL is set to branch out further around the globe starting with Thailand and Australia next year.
Garlinghouse’s vision of a faster and more efficient remittance system is still a long way to go but not impossible. With the amount of progress Ripple has made, it might just be a matter of time before Ripple will standout out to be the leader in the remittance market as blockchain is set to replace the old system.