World financial industry needs a safe money transfer messaging system

In today's international trade and finance, movement of fund across the world has emerged as the most vibrant financial activity. Globalisation, powered by the extensive use of technology in the business and financial operation, has jacked up the turnover of domestic as well as cross-border business hugely. Keeping pace with the rapid growth of global business volume, money transfer activity has also increased manifold.  More than US$ 76 billion is transferred across the world every day. 

Remittance has emerged as a major revenue generating business of many banks or financial institutions. This enormous volume of remittance is transferred through using the messaging facility provided by SWIFT (Society for Worldwide Interbank Financial Telecommunication). SWIFT is a Brussels-based organisation which acts as the centre for message transferring systems across the world.

After the demise of traditional test-based money transfer method through TT (Telegraphic Transfer) and DD (Demand Draft), SWIFT is the preferred means of transferring money internationally. It is the world's largest financial network. SWIFT connects about 11000 banks and financial institutions all over the world. More than 98 per cent of total international remittance is carried out through SWIFT messaging system.

Although SWIFT is considered as the most widely accepted means of fund transfer, it has many limitations too. The users of this system, particularly large banks and financial institutions which mainly channel innumerable fund transferring message every hour, encounter many problems in crediting the desired amount to the beneficiary's account. Specially, when more than one intermediary bank is involved, the incidence of failure to credit the amount to the ultimate beneficiary is considerably high. Among others, wrong credit, fund stuck in the middle of transfer, deducting charge indiscriminately, returning the wire by the receiving bank for simple reason are common allegations against the use of SWIFT messaging system.

 Apart from these limitations, SWIFT has recently lost much of its credibility as the holder of defect-proof money transferring message system. The much-talked-about Bangladesh Bank's reserve heist through using this platform, and hacking funds of an Ecuadorian bank in the same way by using the SWIFT, have raised many questions about the full-proof messaging system of this organisation. Experts no longer believe that SWIFT will remain as a means of fraud or defect-free fund transfer system. Many large banks have already installed some additional control and filtering system so that fraudulent fund transfer can be prevented.

In the backdrop of SWIFT's recent issues encountered by many users and its monopoly operation in the international fund transfer business, many tech experts and technology companies have been trying to develop a suitable alternative fund transfer messaging system. And RippleNet has already emerged as a suitable alternative money transfer messaging system in the world financial industry.

RIPPLE, XRP AND RIPPLENET: Ripple, which owns cryptocurrency XRP and money transfer messaging system, is a technology-based company engaged in developing sophisticated means of storing the value of money and transferring thereof across the border. Ripple emerged as a great gainer in the cryptocurrency valuation in 2017. Cryptocurrency refers to the form of digital currency which is rapidly gaining popularity and acceptability not only in the USA but also in many other countries. So far Bitcoin and Ether are two most commonly used bitcoin. Ripple owns huge number of digital token called XRP, which is valued as other cryptocurrency like Bitcoin and Ether. During the period from September 2017 to January 2018, XRP has gained 1300 per cent increase in its value which has widely surpassed its competitive virtual currency Bitcoin and Ether.

Although XRP is not recognised as typical virtual currency, yet it has exclusive advantages over other virtual currencies like Bitcoin and Ether because it has defined and stated purpose which enables banks and financial institutions to move cash from one place to another place, particularly across the border, at lower prices and at the fastest speed.  Moreover, apart from using XRP as vehicle currency in moving fund, this token can also generate some money as its value changes over time. Ripple has 100 billion XRP tokens and the company holds about 61 billion at $ 1.33 per token as of late January 2018 which means XRP token worth $ 61 billion would be $ 81.4 billion by the end of January.

Ripple has already undertaken extensive measures in popularising their products. They have been working with more than 100 banks to find the way of handling payment for their customers. They are trying to take a lead role in maturing the whole money transfer industry i.e. payment system all over the world. They are now focusing on RippleNet which will act as money transfer messaging system.

Ripple was established in 2012 with an objective of streamlining and decentralising in line with the technology being used in cryptocurrency. Initially it had a plan to use its token XRP as vehicle currency in transferring fund from one country to another country. As for example, Malaysian ringgit can be made XRP in Malaysia and then can easily be transformed to XRP in Bangladesh. However, since inception XRP token has not received expected result in the fund transfer industry and therefore, this company has shifted their focus to their other product RippleNet. This is typically a messaging system which allows the banks to find where money will be transferred and even it will provide the facilities to the remitting banks to settle the transactions they undertake. 

RIPPLENET'S ADVANCEMENT: Ripple has already brought many banks under their network and has signed agreement with them. They have sold out their part of equity stakes to Standard Chartered Bank PLC and Banco Santander S.A  - two largest financial institutions which have worldwide network in money transferring business. SkandinaviskaBankenEnskilda B.A, a leading financial institution based in Switzerland, is planning to commence their commercial payment system through RippleNet. Besides, MoneyGram, which is the most popular worldwide retail fund transfer company, has decided to adopt XRP in their remittance business and they are now in the experimental stage.  

RIPPLENET'S IMPEDIMENT: Although Ripple has made very tangible progress in marketing their product, digital token XRP, and money transfer messaging system RippleNet in the world's remittance industry, yet this company is facing great impediment from the banks who are still reluctant to accept these products in wiring out customers' fund. Banks, which are the main players in fund transfer industry, have not shown that much interest in accepting either XRP token or RippleNet.  But banks usually possess such conservative view not only for Ripple product but also for any other digital currency as they are still sceptical about using cryptocurrency in transferring fund from one place to other place. Being a highly regulated entity, the main fear of a bank or a financial institution is that the regulators may not endorse this token or any other digital coin as an approved currency or instrument.

The writer is a banker based in Toronto, Canada.

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