One of the things that make cryptocurrencies disruptive is because of its underlying technology. Despite many issues surrounding the crypto industry, blockchain technology has a number of promises. For instance, it removes third parties in transactions and for this reason, there are central banks that have been alarmed. In fact, regulators are trying to tighten up measures within the industry considering that it can easily be out of their control.
For those who believe in blockchain technology, many of them believe that it can revolutionize the way we do business. Blockchain believers also think that there are businesses that could potentially become obsolete. Some even think that digital currencies could one day be used to replace fiat currencies.
And with the growing adoption of cryptocurrencies such as that of Litecoin, it seems that the industry is on track. Ripple is another cryptocurrency that has specialized in cross-border transactions. In fact, it has worked with Western Union in order to test out the cryptocurrency as to what it can do to make transactions cheaper and faster.
XRP Is Not Cost-Effective?
But is Ripple really effective? If you will ask CEO Hikmet Ersek, as Western Union is experimenting with Ripple’s product, xRapid as a conduit to transfer money, he mentioned that they haven’t saved money so far. According to Ersek, “We are always criticized that Western Union is not cost-efficient, blah blah blah, but we did not see that part of the efficiency yet during our tests”. He also added that “the practical matter is it’s too expensive”. He said that the company will only be interested to adopt XRP if it proves that it can lower the cost on the part of the company.
Setback on Ripple
This statement by Western Union can be a setback to Ripple. It has claimed to provide cheap transactions specializing in cross-border transactions. In addition to this, the entire cryptocurrency industry is down especially after a South Korean exchange was hacked.
Ripple is currently the third largest cryptocurrency mainly because of the technology that it offers. It is worth more than $20 billion thanks to its promise of a more efficient cross-border payment option.
However, Ersek also clarified that the pilot testing done using XRP may be “too small” to draw their conclusion. It is worth mentioning that Western Union only used the digital currency for transfer of two currencies so far.
Western Union simply made use of xRapid to 10 times. And this could be far too insignificant in order to yield the benefits of the digital currency. Asheesh Birla who works as Ripple’s Senior Vice President mentioned that “If they were to move volume at scale, then maybe you would see something, but with 10, it’s not surprising that they’re not seeing cost savings”. Birla also mentioned that “They do millions of transactions a month, and I’m not surprised that with 10 transactions it didn’t have earth-shattering results”.
According to Birla’s calculations, Western Union could potentially cut 50% of the cost of transactions if it decides to apply xRapid. Western Union is also still maintaining staff abroad in its treasury operations and other functions which make things expensive.