Our deep look into the suite of products offered by Ripple continues today with xRapid. xRapid is a solution offered to payment providers and banks to minimize liquidity costs while improving the customer experience.
xRapid caters mostly for payments into emerging markets. Funds transfers into these markets require a payment provider to have a pre-funded local currency account with the beneficiary. For instance, if Goldman Sachs in the US wants to send money to Nordea Bank in Sweden, Goldman will require to have a pre-funded account with Nordea denominated in Sweden’s local currency, the Krona.
This has made transferring money expensive as financial institutions incur huge capital requirements, with the cost being transferred to the customer in high transfer fees. xRapid does away with the pre-funded accounts dramatically lowering the capital requirements for liquidity.
xRapid does this through the use of Ripple’s native cryptocurrency token, XRP. It offers on-demand liquidity which enables real-time payments in emerging markets. While quite similar in structure and operations to xCurrent, the main difference is the use of XRP in xRapid while xCurrent relies on the real-time transfer of fiat currencies.
The use of XRP in xRapid offers the client banks many benefits. They include speed; the transactions are settled in 4 seconds. This is way ahead of rival cryptocurrencies like BTC which takes 45+ minutes and ETH which takes 3 minutes to settle similar transactions. Traditional systems are much slower, taking 3-5 days.
Scalability is another benefit; XRP consistently handles 1,500 transactions per second and if needed, it can be scaled to handle the same throughput as Visa which currently stands at 50,000 transactions per second. XRP’s technology is also very stable, a major factor of concern when dealing with financial institutions. Since inception in 2012, over 37 million ledgers have successfully closed without a single glitch.
xRapid is expected to continue growing and may soon replace xCurrent as the platform of choice for many financial institutions as they seek to take advantage of the XRP token.