London-based TransferGo is using Ripple’s blockchain platform to support digital money transfers from Europe to India. But TransferGo isn’t the first remittance company to work with Ripple — and it isn't on the same path that others have taken.
In January 2018, MoneyGram began piloting the use of Ripple's XRP cryptocurrency in payment flows through xRapid, Ripple's on-demand liquidity system. Instead of pre-funded accounts at local banks, xRapid uses XRP as a "bridge" between two fiat currencies, allowing payment providers and banks to process faster cross-border transactions.
Unlike MoneyGram’s pilot, TransferGo doesn’t use XRP but sends fiat currency over RippleNet. For TransferGo, the advantage of using Ripple is that it offers real-time transfers compared to the two to three days typically taken using Swift. It selected Europe to India for the Ripple-based version of its service, as this is a multi-billion dollar corridor and there is high Ripple adoption in the Indian banking market.
“The deal between TransferGo and Ripple makes sense from several perspectives,” said Celent senior analyst Zilvinas Bareisis “The U.K./Europe to India axis is a major remittance corridor, and blockchain-based technologies are well suited to facilitate cross-border payments. Ripple has been making good progress at expanding its network."
The MoneyGram partnership, announced at the start of this year, paired Ripple's technology with a legacy agent-based money transfer network. It had the symbolic effect of demonstrating a practical and familiar use for Ripple's XRP, which had been subject to the same valuation volatility as bitcoin.
Ripple has a “freemium” model for cross-border transfers, as Ripple-based real-time transfers to TransferGo’s Indian bank partners attract a fee, and TransferGo also offers free transfers between Europe and India using RippleNet. The Ripple-based TransferGo Free service offers funds delivery in two to three business days with zero fees and a mid-market (inter-bank) exchange rate.
Similarly, for non-Ripple-based transactions, TransferGo offers free transfers around the world in two to three business days at the mid-market rate. Alternatively, customers can pay a fee for the TransferGo Now service which takes 30 minutes to transfer funds globally.
“We see Ripple as a threat to Swift,” says Daumantas Dvilinskas, TransferGo’s CEO. “Swift is a messaging platform for banks, but it’s expensive and legacy-based. By contrast, Ripple’s blockchain platform is a new rail for financial services. We’ve seen initial transactions on RippleNet take just six minutes, and we want to get this time down to a minute.”
Dvilinskas says that TransferGo uses Swift, which has introduced Swift gpi as a response to Ripple, for some of its remittance transactions.
“But, like other remittance firms, we have a network of partner banks in different countries, including 40 banks in Europe, which maintain liquidity for TransferGo in sending and receiving countries,” he said. “We don’t have to do a lot of Swift transfers, as we net off balances each day.”
TransferGo has over 700,000 users and has doubled its number of customers in the last year. As of September 2018, it had processed $1 billion in cross-border transfers and handles nearly 2 million transactions a year. Around 60 to 70 percent of TransferGo’s sending clients are in the U.K.
TransferGo’s existing cross-border settlement system is difficult to scale up, as each bank has a different technology platform and API, which TransferGo has to integrate with, Dvilinskas said.
“Ripple transfers are easier to scale up, as you integrate with Ripple’s network using Ripple’s API, and you form partnership agreements with each bank on RippleNet, so you don’t need to integrate with lots of different APIs.”
Dvilinskas said that TransferGo plans to widen the real-time reach of its international network and will use Ripple to achieve this objective, as well as its existing direct banking partners.
“We really want to increase the real-time reach of our network,” he said. “The Indian remittance corridor is one of the world’s largest receive markets, and TransferGo wants to continue to expand the business it does there. We also see growth potential in the U.K. in the long term, and are considering joining the U.K.’s Faster Payments network.”
In April 2018, Spain’s Banco Santander launched a cross-border transfer service, One Pay FX, in the U.K., Spain, Poland, and Brazil using RippleNet and XCurrent, Ripple’s real-time messaging and settlement system.
Dvilinskas doesn’t regard big banks using Ripple for cross-border transfers as a threat to TransferGo.
“The market is so large that the competitive threat of banks using Ripple for remittances is dwarfed by the size of the opportunity,” he said. “But, so far, banks are mostly using Ripple to move money between their own accounts or for corporate transfers. We’re willing to work with banks like Santander which use Ripple, and we want to connect to bank networks via Ripple. In India, we work with Axis Bank for our Ripple-based transfers.”