Nearly a year has passed since Ripple spoke to bobsguide in late 2017, and 2018 has proven to be a big year for the blockchain cross-border payments startup.
At Swift's flagship Sibos conference in Sydney, Australia, Ripple's head of strategic accounts, Marcus Treacher, discussed the firm's strategy going forward into 2019.
But first, why is the challenger exhibiting at the incumbent’s conference?
We started exhibiting at Sibos a couple of years back and as we grew we went from a visit, to a small stand and then to a big stand. We got to the point when we started to visibly challenge the status quo. Arguably a lot of what’s happening today with gpi was triggered by Ripple and similar firms challenging the technology in cross-border payments.
On the third iteration of our Sibos attendance we were struggling to get the presence we wanted. We felt certain topics weren’t being spoken about, and we wanted to set the agenda ourselves, so we created our own conference Swell. Swell is much more focused and brings fintechs and banks together with a more open networking experience of people within the zone. It’s also broad, combining discussions around faster payments and blockchain.
Because we have a much bigger customer base now, we had lightning rounds of instructions between customers, as well as deal making dialogue. That was a real breakthrough for Ripple, when the community started to work itself, it’s not you as a company selling propositions but the network users are building their own growth into the network.
Nearly a year ago you spoke to us and summarised Ripple’s role like this:
I think Ripple is going to disrupt the world within which SWIFT exists, for the better. SWIFT will have two choices, either to move with the changes or lean into their unique value as a governing body representing thousands of banks. SWIFT has been incrementally improving its technology – with gpi, for instance – but it is yet to make that fundamental shift.
To analogise this, when it comes to improving payment technology, it’s not about putting faster trains on the existing rail infrastructure. It’s about building an airplane. SWIFT gpi is an incumbent reaction to a landscape that is seeing the beginning of change that they’re not prepared to adopt.
A year on is this still true?
It’s pretty much still on point, we haven’t deviated and if anything 2018 has proved out those predictions. I feel very strongly that although we’re targeting the underserved high volume low value flows and connecting the underbanked in Africa and Asia. As we build our clientbase and build our volumes there’s a natural question as to why we don’t apply our technology to treasury, to banks’ bank flows and to funding and liquidity.
You might get a ‘train to airplane’ type play where there’s always a role for a SWIFT body, or you might get to a tipping point. I personally believe in the impact of innovation, that when things start to move they generally play out; there’s a degree of inevitability that the world will move on from the 1970s model that is entrenched in Swift.
Nevertheless if Swift was open to collaboration, would Ripple contemplate it?
The further we go on the Ripple journey the less important a collaboration with Swift becomes. That’s because we’ve started with a very clean sheet.
We created our own governance body which consists of our customer banks and Ripple, the provider, is at arm’s length; it’s a very clean community banking governance. The rules that govern Ripple are ultimately managed and owned by that body. I think we’ve created a much more effective steering committee than the body that runs Swift today; it’s more flexible and embracing of different providers.
From a distribution perspective, Swift’s technology is upgrading a very old base. There’s room for improvement – and gpi is improving – but there’s a point where the legacy base will hit a ceiling.
That might be hastened as the world moves towards a G-zero model where different countries require very clean connectivity with each other, or it might be the sheer scale, particularly as the size and complexity of FIN messaging changes.
There are definitely limits to Swift’s fileact model but the model we’ve created is very clean and different and, more recently we’ve been able to define effective information standards for moving payments back and forth globally.
We’re not constrained with questions of moving from MT to MX or ISO 3022 because we went in with ISO 2022 from day one using the JSON model which gives an API dialogue that may even go beyond XML. If you look at the value of Swift versus Ripple, it’s hard to see the incentive for us to collaborate. Swift may want to chat; they may see value in Ripple and the model that we’re developing.
I think it's very important to keep things clean and focused, that’s how we’ve succeeded up until now. The entire stack we’ve created is fresh and new and free of legacy, it’s a very elegant proposition from top to bottom; we don’t really want to pollute that.
Whether there’ll be some commercial arrangement, I don’t know.
Much has been said of Open Banking and the emergent API culture. How does Ripple fit into this new market model?
Ripple fits ever so well into that model. You and I are lucky to be working in an industry during exciting times. Banking has been incremental and even the technology that’s in play today is simply automating what the Medicis worked out in the 1500s. For the first time there’s serious disruption in the market.
The future macro view is the same as other industries: collaborations of providers that work in very heterogeneous supply chains. For instance, you have a core brand like BMW, but, in the background, you have a whole portfolio of supply chain companies.
Banking is not like that, it is monolithic and many activities are clubbed together that conveniently fit under these single brand company names.
APIs and Open Banking are very powerful catalysts that are exploding those activities into many components.
I think the banking world is fragmenting into specific players and the role of the winners will be about aggregation, holding the customer to your brand and connecting outward to the ecosystem. It suits us beautifully because one of the killer plays we have is the embracing of the interledger.
That openness is perfect in a world where you’re connecting players together and creating a network of value. The end result provides much better services for startups, people and companies.
What area is Ripple specifically attacking and planning to attack?
The white space that is currently underserved is P2P remittance, the SME space and the midmarket. As the Ripple proposition is adopted, people will behing to ask what else they can use it for. If you can exchange value worldwide in a matter of seconds with complete certainty, then that can be overlaid onto trade propositions; the stack starts to build very neatly. We really are replumbing the financial system.
Our long term vision is to have Ripple access right down to the end user so that they can instruct their bank to transact on their behalf using the Ripple connection. That’s important otherwise you don’t deliver the real value to the end user. Corporates would massively benefit from what we’re doing.
One of the big wins that we will deliver is solving the world’s liquidity problem. Some $20-30trn of the world’s wealth is locked up in accounts, and because we can move money in real time while linking it to effective management of fiat currency, it unlocks liquidity. We’re also doing a lot of work with xRapid to go one step further and place funds into target accounts at the place of need.
There are two problems we’re sorting out. RippleNet sorts out slow and ineffective payments and xRapid makes liquidity more efficient.
Why not slot yourself in as payment solution of choice with existing established fintech that already serve tier 1s?
You have to be strategic with whom you partner. The chemistry is very important. Google and Facebook didn’t partner and they did a great job focusing and building out. We’re also active in the broader market. We’re not an island but connected to the outer world.
We’re certainly interested in working with counterparties.