May 2019 marks an important event in the international money transfer community – the partnership between Ripple and Ria. Both organizations are leaders in their domains. Now they are combining their sizable resources and knowledge. Let’s take a look at what problems this alliance will solve and what great things are in store for the future of moving money across borders.
Ria was founded in 1987 and opened its first physical store in New York City. Owing to its customer-centric business model it quickly expanded operations to several countries in Europe and Asia. In 2007 Ria was acquired by Euronet Worldwide, which was already a world leader in processing electronic transactions. In 2012 Ria went online and became RiaMoneyTransfer.com. Through the 2010s Ria continued expanding, this time in the Middle East and Latin America. It struck notable partnerships and acquired domain-relevant businesses such as XE, the world’s favorite online currency conversion tool. Ria has now grown to be one of the largest money transfer services in the world. Today Ria has a worldwide agent network with presence in 149 countries and 369,000 locations. It employs more than 3,700 people worldwide. Backed by Euronet’s robust technology and infrastructure Ria guarantees cost effectiveness, speed, security and convenience for billions of dollars worth of international money transfers annually.
Ripple has a shorter but equally illustrious history. It was founded as Ripple Labs in 2012 in California by the well-known entrepreneurs Chris Larsen and Jed McCaleb. The intent was to create an innovative, cost-effective, decentralized, digital monetary system by harnessing the power of cryptocurrencies and open source technologies. Ripple’s global network of banks and financial institutions (FIs) is 200 strong and includes big names such as Standard Chartered Bank, Westpac, Banco Santander, and BBVA. Despite its relatively short history Ripple is already cash-flow positive and has won many awards for its innovative fintech.
The problem with legacy systems
Financial networks made up of banks, credit card companies and other institutions suffer from many shortcomings, mainly because they are comprised of many disparate networks instead of one large unified one. Since they operate on different systems and protocols, cross-network transactions tend to be slow, error prone and costly. This is why international money transfers suffer from processing delays. Today we can stream high definition movies in real time; yet, financial transactions requiring a fraction of the data still take days to process. The technology for significantly improving international payments has existed for a long time. The primary reason for not using efficient fintech is that legacy payment networks have little incentive to improve things, considering the excessive fees and currency exchange charges they currently impose. This is why banks and FIs hide behind complex financial jargon and resist progress.
Ripple’s digital gateways allow companies, governments and FIs to transact on an integrated network called RippleNet using a unified protocol called the Ripple Transaction Protocol (RTXP). Ripple’s digital currency, the XRP acts as a wildcard/mediator for transactions with fiat currencies such as the USD and EUR, as well as cryptocurrencies such as the Bitcoin. This means that currency conversion costs on RippleNet are close to zero and transactions can be processed almost instantaneously. A comparison between Ripple and various other modes of international payments clearly shows the obvious cost and speed advantages. Ripple’s genius lies in beautifully incorporating open source technology and multiple innovative components including their digital currency and their open payment network to build a stable, reliable, scalable and cost-effective system. The terminology can sometimes get confusing since the name ‘Ripple’ is used interchangeably to refer to the network, the currency, as well as the parent company.
The partnership (and how customers will benefit)
The worldwide volume of cross border transactions exceeds $155 trillion annually. Despite this the costs of moving money remain as high as 5%. The error rate on these transactions is also unacceptably high at 4%. Moreover transactions often take days to process. The flawed mechanisms and inefficient, leaky banking structures are responsible for the unsafe, error prone and costly nature of international money transfers.
Ripple aims to make money transfers standardized, real-time, certain and cost-effective. Ria is one of the largest money transfer services in the world, moving $40 billion annually. The partnership combines Ria’s resources with Ripple’s network of 200+ financial institutions. For customers this would mean increased efficiency, speed, transparency and efficiency. It would also mean better visibility and end to end tracking. In addition to money transfers Ria now also offers bill payments, mobile top-ups, prepaid debit cards, check cashing, and money orders. The partnership has the potential to significantly reduce transaction costs for all of these transactions. RippleNet customers will benefit from Euronet’s Digital Integrated Payments Cloud and access to Ria’s global fintech ecosystem, enabling cross-border payments both ways. Good things are in store for us!