XRPL DeFi Developments and the $190 Trillion Cross-Border Payment Opportunity

• While the XRP Ledger is revolutionising several industries, one expert thinks that the $190 trillion cross-border funds transfer market is the most lucrative.
• With Ripple Payments, international transfers are reduced from 3-5 business days to seconds through the XRP-powered real-time messaging technology, eliminating the need for Nostro and Vostro accounts.

The XRP Ledger has become home to a diverse set of dApps that span diverse sectors, from decentralised exchanges and supply chains to social media and sustainability. While tokenisation has been deemed the biggest opportunity for blockchain, one expert believes that XRPL’s biggest value is in another sector in which it has a headstart: cross-border transfers.

Max Avery, a renowned writer and entrepreneur, noted that today, the cross-border transfer sector is “slow and expensive,” and Ripple’s solutions, settling in XRP, “could change how money moves worldwide.”

Among all the DeFi developments happening on the #XRPL – It’s important to revisit the cross-border payment market. The current cross-border space is around $27 trillion, and old systems are slow and expensive. @Ripple‘s solutions, settling in #XRP, could change how money moves…

— Max Avery (@realMaxAvery) October 28, 2024

Despite the rapid advancements in technology in almost every sector, including finance, international payments have been quite defiant. It still takes up to five business days to send money across countries, with multiple intermediaries involved, including banks and fintechs. This results in high costs, an opaque system and limited ability to track these payments. Residents from less developed countries feel the pinch the most as they depend on remittances from their friends and relatives working abroad, with a World Bank study finding that a 10% increase in remittances could spark nearly 1% in GDP growth.

Avery says Ripple, through its XRP-based products, can change this, singling out Ripple Payments as a particularly important piece of the remittance puzzle.

Ripple Transforming a $190 Trillion Industry

Last year, experts estimated that the value of cross-border payments was over $190 trillion, a significant jump from the $156 trillion in 2022. This was across the business-to-business and consumer-to-consumer verticals, with the former accounting for the lion’s share.

Clearly, this is a massive market, and Ripple Payments is best placed to transform it. Formerly known as RippleNet, this solution connects several financial institutions globally with infrastructure that offers real-time payments. 

RippleNet, now known as Ripple Payments creates a global network of financial institutions with standardized technology and real-time messaging, simplifying cross-border transactions through pre-validated participant information and the #Interledger Protocol (ILP). #3/17 🧵

— Max Avery (@realMaxAvery) October 28, 2024

Ripple Payments relies on XRP, but only as a bridge currency for its On Demand Liquidity (ODL) feature. This eliminates pre-funding requirements; today, banks have parked over $27 trillion in Vostro and Nostro accounts as pre-funding for cross-border transfers. With XRP-powered ODL, banks no longer need to refund the accounts as the transfer of value is instant. This frees up $27 trillion for other uses, including lending to spark economic growth. For context, this amount equates to the GDP of the United States.

Avery noted:

As I’m sure you are aware, Ripple offers 3-5 second settlement times and operates 24/7 without banking hour restrictions. It reduces costs by up to 60%, eliminating the need for nostro-vostro accounts and reducing operational overhead.

“For financial institutions, the question is no longer whether to adopt new payment technologies, but when and how. Ripple’s comprehensive solutions position it as a leading contender in modernizing global payments,” he added.

XRP trades at $0.5266, gaining nearly 2% over the past day.

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