Blockchain Unlikely To Be Used By Banks To Process Payments For Now – Ripple

Blockchain, News | June 14, 2018 By:

David Schwartz, Ripple’s chief cryptographer, claims that banks are unlikely to use blockchain technology to process cross-border payments for now due to issues around scalability and privacy.

In an interview with Reuters, Schwartz said that while blockchain boosts efficiency and reduces data discrepancies, the technology is not yet scalable or private enough for banks.

“What we hear from many of our customers is that it’s imperative to keep their transactions private, process thousands every second, and accommodate every type of currency and asset imaginable,” Schwartz said. “Ripple’s approach is what has enabled it to move beyond tests with banks.”

Ripple’s xCurrent offers an immutable interledger protocol that allows instant settlement, making it superior to existing payment networks. However, Schwartz said xCurrent “is not a distributed ledger.” While xCurrent uses cryptography, each party using the system does not have access to a shared ledger, as is the case with distributed ledgers like ethereum or Hyperledger Fabric.

Marcus Treacher, senior VP of Ripple customer success, said the company had launched a project to offer banks “classic” blockchain-powered payments. But the banks rejected the initiative, citing that one cannot just put “the whole world on a blockchain.”

In November 2017, American Express and Santander Bank partnered with Ripple to use xCurrent in order to speed up cross-border payments between the US and the UK. In April of this year, Santander confirmed the launch of its Ripple-powered blockchain payment network One Pay FX.

Last month, Ripple released the results of several xRapid-based pilots. Ripple claimed that financial institutions using the solution saw a savings of 40-70 percent compared to what they normally pay foreign exchange brokers.

xRapid was developed for payment providers and other financial institutions who want to minimize liquidity costs while improving their customer experience. It connects a financial institution directly to exchanges in both the sender’s and receiver’s countries. xRapid is not being used by banks, but have been recently tested by money transfer companies, including Western Union, Viamericas and MercuryFX.

In a recent interview, Western Union CEO Hikmet Ersek said that while his company is still experimenting with Ripple’s xRapid product, it has not saved money so far.

“We are always criticized that Western Union is not cost-efficient, blah blah blah, but we did not see that part of the efficiency yet during our tests,” Ersek said. “The practical matter is it’s still too expensive.”