Ripple is both a company and digital currency that has entered into partnerships with major financial institutions as a mechanism to transfer large sums of money between banks in different countries (as well as other financial services).
This transfer process has traditionally been facilitated by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which is a network allowing banks to send secure payment orders between financial institutions. The institutions then set up correspondent accounts, where the orders are processed and settled (which can take 3-5 days). SWIFT charges member banks a one-time set up fee, yearly support fees, and a per message charge (individuals can pay at least $25 per message, but institutions with larger message volume pay a smaller per message fee).
Ripple improves on the current system by allowing secure transfers without the need for 3rd party processing and settlement.
Ripple, the company, currently has three products, but only one of those products claims to require the XRP token:
- xCurrent is enterprise software used to instantly send and settle cross border payments.
- xRapid helps minimize liquidity costs for financial institutions. Often they will need to hold large amounts of different local currencies to execute payments into emerging markets. Instead of being tied to capital requirements in each country, they can instead hold the XRP token/coin.
- xVia is an Accounts Payable platform that allows businesses, payment providers, and financial institutions to invoice and pay their vendors.
Ripple as a company has multiple lines of business, but note that only xRapid involves the use of the XRP token. It is unknown at this time if their 100+ partners are using some or all of their services (even as a pilot or beta test). Ripple’s product with the biggest disruptive potential is xCurrent, but it does not currently require the use of the XRP token.
xRapid, which uses the XRP token, is appealing to financial institutions that operate in certain countries. At the 2018 Blockchain Connect Conference, Ripple CEO Brad Garlinghouse noted a conversation he had with a Peruvian institution that wanted to use the XRP token as a stable reserve currency. However, unlike Peru, most countries already have a reserve currency that is equally, if not more, stable than XRP. Therefore, it is less likely that banks and governments in countries with stable currencies will use XRP.