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Comment by 1ba9115454 | Hacker News Reader

Ripple wants to be a global payment platform for banks.

There's just one problem, the banking world already has a platform (created by the banks) called Swift.

Nearly every bank in the world is signed up to this platform and the banks can send payment requests to each other for pennies. (Basically text promises.)

The network effect in full effect.

So what's the advantage of Ripple? Well as far as I can see they don't have a USP.

And worse, even if a bank wants to start communicating with other banks using the Ripple network , each bank now has to create new agreements with each other. As opposed to Swift where you just sign up once.

Good luck with that.

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Here is my experience with SWIFT for International payments:

1. Emitter pays around 35-50 USD to send you the money.

2. It takes from 5 to 10 days depending on (traffic?).

3. No clue where your payment is until it hit your account. Basically there is no visibility (unlike the blockchain where you can see in real time if the payment is made even though it is not confirmed).

4. Your bank take a cut. Usually it is another 10-20 USD.

And here is the worst part. In some countries (maybe many, most?) there is an obligatory FX circle even if you hold USD accounts.

1. You receive the amount in USD.

2. Bank convert USD to Local Currency.

3. Bank convert Local Currency to USD.

4. USD deposited in your local bank account.

And here is the funny part: The bank make sure it fucks you really well on the FX fees. Around 5-7% both ways. So ends up over 10% of the total amount + the fixed fees.

Welcome to reality.

I’ve done many FX wire transfers in China, and they’ll transfer USD directly if you have it. If not, they convert to USD first, well, since it is from RMB you need lots of documentation to do that anyways. If you receive USD, it stays as USD until you want to change it tonight RMB. They actually just can’t auto convert it either way since the RMB is not fully convertible.

Same is true for CHF, Euro, any other fully convertible currency.

That doesn't sound like the sort of thing Ripple is going to fix - as it's aimed at being an inter-bank settlement layer, those banks would still get to play those games.

As a consumer, sending money to other people where I am is free and effectively instant. Sending within the EU is heading this way too thanks to SEPA.

Not really. If two exchanges support the Ripple platform, you can move USD without friction. If businesses started supporting Ripple, then you can transact with them too.

You don't need to be a bank or an institution to start using Ripple. You can do so at Gatehub.

> you can move USD without friction

You can already move U.S. dollars frictionlessly: with instantaneous, irrevocable and pennies-to-a-dollar Fedwires. SWIFT is more useful for non-dollar settlement, or between banks without dollar clearing privileges.

> You don't need to be a bank or an institution to start using Ripple.

Sure, but I'm not going to stop transacting using my bank or my national currency any time soon, for a huge variety of reasons. Ripple is angling to be an inter-bank service (see the first sentence in this thread), which doesn't solve the problem of banks playing exchange-rate shenanigans.

It lowers the barrier to entry for remittance competitors significantly. Had planned to build a proof of concept for a hackathon back in march but ran into issues with nobody on the team having foreign bank accounts that we could pair with crypto exchanges. We planned to use Bitstamp -> Bitso to change USD to MXN via moving XRP between the exchanges. All the API documentation is there to make it happen but unfortunately we couldn't open real accounts and one or both of the exchanges didn't have a sandbox API. However the cost to make a transfer would effectively be less than 1% and take roughly a day, which is essentially the time it takes to deposit money from a crypto exchange to a bank account.

It's not really about being settlement layer as much as a way to crowd source vostro/nostro accounts. At least that's how I interpret what xRapid's page[0].

https://ripple.com/solutions/source-liquidity/

Here's mine:

1. Bank charges ~5 USD

2. It happens same day

3. The receiving bank charges nothing

I'm typically transferring between US, CH and GB accounts. Occasionally DE. This has been the case for all of them.

When I want to avoid FX fees/spread I just use Revolut as an intermediary, which adds about a day and no fees.

SWIFT isn't bad, bad banks are bad. Make sure to use decent banks and you'll be fine.

Swift has high fees, approx $30 per transaction, and 6% of those transactions require some sort of human intervention down the line, the last time I checked.

If you believe Ripple's marketing [1], a remittance company sending $12b of payments a year stands to save 33% on operational costs using their xCurrent software. It would also take seconds to send payments instead of days.

[1] https://ripple.com/files/xrp_cost_model_paper.pdf

Eh, SWIFT's GPI service apparently already only takes a few seconds, not days, and has around 150 banks signed up and using it, and it's transferring over 100 billion USD per day.

One person's high fees are another person's profit centers.

I don't understand what your point is.

I was trying to say that high fees for the consumer are the profit centers for the banks. (Which is why in my opinion the banks would never use Ripple.)

So, this is basically the opposite of how free markets work.

So how does Ripple make money then?

$10m implementation fee, plus it attempts to make the conversion from using xCurrent (which doesn't need XRP) to xRapid (which does), the incentive being that you save more.

And also, the banks make a ton of money using Swift. Even the Western Union and MoneyGrams of the world want to keep taking their huge cut. Even a new startup will have trouble getting traction in places where you can't exchange Ripple for fiat.

Add to all of this the fact that 60% of the tokens are held back. Who wants to take a large position in a currency when a single entity can flood the market anytime they want.

They can't. Their 60% is in escrow. 1 billion XRP is released each month and the remainder of the unused XRP is put back into escrow after that month. https://ripple.com/xrp/market-performance/

I didn't realize that, sorry. But 1 billion released each month still has to have a huge effect on and kind of supply/demand.

The advantage of using Ripple's platform versus Swift is it allows you to crowd source your Nostro and Vostro accounts, which frees up that capital to be invested elsewhere. Basically what Circle does except with a more native implementation.

There are plenty of examples of incumbent players being disrupted by new technology. Besides better interop, what do you reckon would a competitor need to offer for it to be compelling offering to banks?

A radical USP. You have to disrupt an existing network.

Swift (aka wire transfer) is both slow and somehow has very high fees.

It's trash, I'd rather bypass US banks and use crypto at this point.

You're thinking of swift from a banking customer perspective.

The banks don't pay high fees to Swift, they just charge you high fees.

But, if you can avoid that with crypto then good on you.

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