Ripple Ecosystem Expands with British Startup Ripula

© Can Stock Photo Inc. / DimitrisRipple Labs has been making waves in the money movement sector, lately, and the company has ambitions that extend even beyond the world of currency. Last month, it announced three new bank partners — and now a London-based startup called Ripula has built a gateway to Ripple’s platform, the first in the U.K.

The newly launched gateway may lead to more Ripple transaction volume.

Ripple, founded in 2012, is a currency exchange platform much like the blockchain of bitcoin, with a major difference. The blockchain can only denote one asset type — BTC — while Ripple can move any kind of stored value, according to Patrick Griffin, executive vice president of business development at Ripple Labs. Furthermore, access to Ripple’s platform can be free of payment, meaning no currency needs to be bought and no risk undertaken in order to move money. (Ripple has a proprietary virtual currency, ripples, that is used on the system, but is not necessary to purchase ripples to moves funds.) By contrast, a user needs to buy bitcoins to access the blockchain, and be exposed to the volatility inherent in a bitcoin purchase.

“Banks can plug in without any taking on any risk,” Griffin told Bank Innovation last week. “Ripple can serve as an extension of deposits to cores. Banks can transfer value at no cost and store any type of value. It’s the first alternative to correspondent banking.”

Griffin went on to describe how Ripple could make itself felt in the macro world of money movement. “Before SWIFT, regional banks moved money by holding funds at each other’s institutions,” he said. “This ties up capital. Now with money center banks and SWIFT, they take in collateral and open up lines of credit to transact with smaller outlay. This exposes transactions to problems with latency, transparency, and midpoint failures. Ripple allows regional banks to connect in real time on a bilateral basis, without posting collateral and reserves and using algorithms to get the optimal cost.”

Ripple is not a complete money movement platform, Griffin explained. Such a platform would include 1) a rule set; 2) a messaging standard; 3) software to account for transfers; and 4) management procedures. Ripple only has the third item on this list. “Ripple is not a competitor to ACH and SWIFT,” Griffin said. “SWIFT and ACH are messaging systems. Ripple is a ledger. Where it changes the game is with global money center banks.” Griffin said Ripple can work with ACH and SWIFT to bring less expensive money movement to smaller banks.

The world of money movement is not a “small world” in any sense. Said Griffin, “$25.5 trillion moves through the network in the interbanked world. Clearing house banks move $5 trillion a day. Compare this to Visa, which processes $3 trillion in a year.”

Ripple’s network currently processes about $1 million per 24 hours. However, since Ripple is only software to account for transfers, Ripula is needed to serve as a gateway to that software for financial institutions. That’s why Ripula might spur more Ripple transactions.

Ripple aims to do no less than provide an alternative to the system of money center banks. The versatility of the system means Ripple has capacity to move value beyond just currency, Griffin said.

“We’re looking at securities and commodities,” Griffin said. “We see really big opportunities there.”

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Philip Ryan is Senior Editor of Bank Innovation and Senior Director of INV Fintech. He began covering financial services in 2012 and has more than 15 years' experience in online journalism, which makes him quite old. He can be reached at pryan@royalmedia.com.

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