Blockchain Tech Gives Digital Payments a Speed Boost
Technology With the blockchain becoming more of a reality, Ripple dives deeper into this complex platform and why Canadians need to be ready to embrace its integration into the payments industry.
It’s 2018, but sending payments around the world can make it feel like 1968, says an expert in the digital payments space. While wire transfers and payments are a daily occurrence, especially in a more connected world, the majority of the legacy infrastructure that enables cross-border payments was built in the 1960s. Founded in 1973, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) remains the most widely used provider for financial institutions facilitating money transfers.
With the rise of the Internet in the 1990s came digital payment providers as new, viable option for money transfers. But pain points continue to stifle the fast and efficient flow of funds, says Asheesh Birla, Senior Vice President of Product at Ripple, the San Francisco blockchain company.
“Using blockchain technology, we’re able to exchange payment information between different financial providers without a middle man,” says Birla. “It’s revolutionary because it enables money to move instantly or for a sender of a payment to find out immediately when a payment has failed. There's no middle state where you're wondering, ‘did it get there or not?’”
These transfers are known as “atomic payments,” meaning there is no guessing on its status. Either the funds transfer and are deposited into a recipient’s bank account, or it fails and the money remains in the sender’s account.
Blockchain-powered payments can speed up the process of a payment. Whereas a typical wire transfer takes days, payments over Ripple’s network take minutes or seconds instead — similar to sending an email.
Digital assets like XRP can also help make payments instant.
“For payment liquidity, where you want to get money into local currencies as fast as possible, companies can exchange their own fiat currency for XRP using a digital exchange,” he says. “It then gets converted through a local digital exchange into the country’s home currency and paid out instantly.”
The process takes seconds and negates the need for a business or individual to maintain a bank account in the country, Birla adds. “Corporate customers for banks using this technology are getting a faster experience,” he says. “Their money appears right away, with tracking numbers like packages in the mail — ultimately helping to deliver new experiences to their customers.”