American Express (Amex) sent waves through the financial and payment sector this past Thursday partnering up with Ripple, the cross border payment platform that seems to be seeping into every payment channel now. Ripple has signed on over 100 financial institutions to the RippleNet including: Bank of America, Banco Santander, YES Bank, RBC, National Bank of Australia, BBVA Spain & Mexico, and many more. With Amex now on the RippleNet, Ripple is gaining traction with each passing day.
As big and surprising as this news was, it wasn’t a shocker to those who follow Ripple’s Reddit or XRP Chat closely. Back around Ripple’s Swell Event in mid-October, many people were speculating on Ripple’s future partnerships and many were pointing to Amex. Someone managed to get a photo of an internal company email from Amex stating the companies preferred choice for a distributed ledger platform was Ripple. At the time, no one could independently verify the info and with the Swell event passing by with no news, it simply faded off.
Amex is joining the RippleNet to provide real time gross settlement (RTGS) for business to business transactions, thus greatly enhancing their customers’ experience. To start off this program, American Express FX International Payments (FXIP) will partner with Santander UK to open a corridor between the U.K. and the U.S. The U.S. is the U.K.’s largest trading partner, so this couldn’t be a more perfect solution that brings frictionless payments to the table, which commercial global payments are in dire need of.
José Luis Calderón, Santander’s global head of transaction banking, stated:
“This blockchain solution opens up a new channel between the U.S. and the U.K. and presents a significant opportunity for payments globally. Collaborating with forward-thinking businesses has enabled us to deliver this cutting-edge, secure, friction-free payment solution and extend our ‘Simple, Personal, Fair’ philosophy to American Express and their customers.”
Ripple’s CEO, Brad Garlinghouse concurred with Calderón, saying:
“Ripple is taking a huge step forward with American Express and Santander in solving the problems corporate customers experience with global payments. Transfers that used to take days will be completed in real time, allowing money to move as fast as businesses move today. It’s just the beginning, and we look forward to growing this partnership to help other American Express FXIP customers.”
The U.K.-U.S. corridor will open up more corridors as the cost savings gained by Santander UK show, we will see more banks hop on board. Banks care about one thing: money. By showing the immense savings of these cross border transactions handled by the RippleNet, banks will have no way of ignoring this technological innovation.
The proof is in the pudding.
SWIFT vs. Ripple
Compared to the traditional legacy system used for most international payments, SWIFT, Ripple’s blockchain payment system allows for end-to-end visibility of transaction status and costs associated. Not only that, what used to take two to five days and have high transaction fees (SWIFT), now takes a mere four seconds and costs a fraction of a penny. On top of that, FXIP transactions will now be more secure than ever, an issue that has plagued SWIFT throughout its lifespan since its inception in 1973.
Just this past month, hackers managed to steal $60-million from a Taiwanese bank after they broke into the SWIFT terminal system. In summer 2016, SWIFT was hacked on three different occasions. Ripple has had no major breaches in it’s history and it’s ledger has been running flawlessly since 2012.
When it comes to cost savings, it’s hardly a comparison between SWIFT’s legacy system and Ripple—note photo below..
Even SWIFT’s new system, GPII—Global Payment Innovation Initiative—doesn’t compete with Ripple. Note the photo below is a little out of date. Ripple now has over 100 banks signed on as stated earlier in this article.
End of an Era
A major step forward for Amex will be phasing out those plastic cards we carry around everywhere to make payments. Debit and credit cards will be on their way out over the next decade or so as we see more mobile payment—Apple Pay, AliPay, Venmo—systems gain users, and as users see the advantage of these systems.
Amex hired Leslie Berland specifically to figure out what will make her company’s flagship product obsolete. In an article by Wired, she discusses the two things we always have on us: a smartphone and a credit card. The day will come where these two are combined, and some could say we’re already there, just not on a mass scale.
Berland discusses how the inevitable day where your phone and credit card combine, stating:
“What we are hyper-focused on is how do we merge those two things. Especially as one day the physical card will disappear.”
Berland is not the only one thinking the plastic cards are on their way out, it is one of the biggest issues facing Silicon Valley currently. The same people who made it possible to hold thousands of songs on your phone and take selfies are trying to figure out the best way to go about this. Everyone from Google and Apple to Square are working on this.
Opportunity for Ripple
The dilemma facing Silicon Valley above is simply just an obstacle. A quote Steve Jobs frequented goes as, “Obstacles are opportunities in disguise.”
Ripple is that solution, giving banks a four second settlement time and the ability to handle upwards of 50,000 transactions a second. Sooner or later people will come around to realize how much Ripple truly has to offer. The cost and time savings alone will free up billions of dollars that get locked up in international transfers.
2018 will be a big year for Ripple.
- This author currently has a stake in Ripple.
- This is not investment advice, always do your own research. It is very important to do your own analysis before making any investment based on your own personal circumstances.