Ripple, which sells blockchain payments software to banks, announced on Monday a major milestone: 3 banking clients have moved from pilot-testing to full commercial use of Ripple’s xRapid product, which uses the cryptocurrency XRP as a liquidity vehicle for cross-border payments.
Mexico-based Cuallix and London-based MercuryFX, which are remittance companies, and Catalyst Corporate Federal Credit Union, which represents 1,400 member credit unions, have all begun commercial implementation of xRapid. Ripple, in a press release, touts that this is the first time a digital asset is being used in commercial payments by a financial institution.
Ripple offers two main products for banking clients: xCurrent and xRapid.
The xCurrent software is real-time messaging between two banks for a range of settlement scenarios; it is a competitor to SWIFT, the outdated messaging system most banks still use, where payments can often take days to settle as messages go back and forth.
Built on top of xCurrent is xRapid, which is designed for remittance companies to address a specific issue: dormant pools of unused cash that sit in various countries where companies need to send money and convert it to local fiat currency.
When a bank in Boston, for example, needs to send funds to a bank in Mexico, it typically takes days on the other end for the dollars to get converted to pesos. With xRapid, the Boston bank puts dollars into XRP, sends the XRP, and on the other end the Mexico bank converts the XRP into pesos. It all happens in seconds. (See the above interview from Yahoo Finance’s crypto summit in February for more on the difference between the two products.)
More than 100 banking clients are already using xCurrent, which does not use cryptocurrency. Just eight customers have tested out xRapid, including Western Union. And now Cuallix, MercuryFX, and Catalyst are putting xRapid into full commercial use. It marks the commercial launch of xRapid.
“This is a big step for Ripple,” Ripple CEO Brad Garlinghouse tells Yahoo Finance. “A year ago we were talking about this product as an idea, and now it’s in production and we can talk about real customers. This is also big for the XRP ecosystem, because it helps drive liquidity. But I also think it’s a big deal for the entire crypto industry. The vast majority of crypto trading is just speculative. And for crypto to reach its potential it needs to ensure that digital assets are solving real problems for real customers. Right now, we are unique in that we can point to real production, and I think XRP is uniquely positioned to solve this payment problem.”
While xCurrent is in wider use right now, it is the xRapid product that appears to be the bigger focus for Ripple moving forward. Asheesh Birla, Ripple’s SVP of product, confirms, “Both products are growth engines, but in terms of the transformative effects of reducing friction, xRapid has the opportunity for a bigger impact.”
To be sure, some companies may still be wary of using xRapid because it runs on XRP, a controversial cryptocurrency. XRP soared by 32,000% in 2017, a bigger spike than any other cryptocurrency. It has plunged 75% so far this year, though it has rallied in the past month.
Although Ripple, the company, owns 60% of the supply of XRP tokens, and although the only business use case of XRP tokens is in Ripple’s product, and although Ripple in the past referred to XRP tokens as “ripples,” the company is now seeking to publicly distance itself from XRP.
Among crypto fanatics, there is “religious-like fervor” around XRP, as Ripple chief strategist Cory Johnson put it at Yahoo Finance’s All Markets Summit in San Francisco in June.
Alastair Constance, CEO of MercuryFX, says his company is jumping on board with xRapid because the product has evolved in two key ways: “There’s never been a dispute about speed or trust in an economic case,” he says. “But it’s become a lot more user-friendly, and also its geography has expanded. I’m getting the feeling that many others are primed to jump on the XRP ledger now. The bottom line is I can make a payment that takes me two days and costs me $50, or make it in a few seconds for 5 cents. It’s a no-brainer. I think this will quietly replace the SWIFT network.”
Constance also touched on the lingering education hurdles when explaining a crypto-based product to traditional finance companies. “When you talk to people in our space about crypto, you get one of two things,” he says. “You get people who say it’s exciting, they want to get involved, but they’re not actually picking it up and running with it; and then you get people who literally just glaze over, because a lot of people just misunderstand what crypto is. But the mood is changing.”