San Francisco-based Ripple has taken a far different tack than other cryptocurrencies. The company embraces centralized financial institutions and promotes their xRapid system, which use Ripple’s native XRP cryptocurrency, as a way for banks to make cross-border payments cheaper and faster. However, such may not be the case.
Ripple has long touted their blockchain solutions for payment transactions. The company’s CEO, Brad Garlinghouse, has taken quite a few shots at Bitcoin, calling it the “Napster of digital assets” and not the “panacea” people expected.
Garlinghouse says that there is no comparison between BTC and XRP. He says it takes an average of 20 minutes to complete a Bitcoin transaction. By comparison, an XRP transaction only takes 4 seconds. Then there’s the benefit for banks in that using XRP frees them up from having to keep capital on hand at the transaction’s destination.
Now it appears that the CEO of Western Union is throwing some rain on the Ripple parade.
Not Living up to the Hype
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.
The practical matter is it’s still too expensive.
However, there is a caveat to this situation. The pilot program that Western Union is using for the project has only sent 10 payments using xRapid so far. Another factor is that all 10 transfers have been between US dollars and Mexican pesos.
Ripple senior vice president of product Asheesh Birla says that the test size so far is too small to draw any conclusions. Birla notes that the actual pilot program has only been operating for a few weeks due to the fact that it took Western Union almost six months to get all the internal groundwork in place.
If they were to move volume at scale, then maybe you would see something, but with 10, it’s not surprising that they’re not seeing cost savings. They do millions of transactions a month, and I’m not surprised that with 10 transactions it didn’t have earth-shattering results.
Birla maintains that if Western Union uses XRP and xRapid for all its payments, total costs would be cut by 50 percent. He notes that other companies have reduced their transaction costs from 40 to 70 percent by using the Ripple blockchain.
So far, Western Union seems intent on continuing to work with Ripple. It’ll be interesting to see if costs drop once the pilot program expands.
Do you think the use of XRP to lower transaction costs is overhyped? Let us know in the comments below.
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