The United States lags in the adoption of instant payment networks like FedNow, in stark contrast to other nations around the world. Ripple’s XRP emerges as a potential solution to this important problem, offering fast and profitable cross-border transactions. The widespread adoption of new technologies like XRP continues to pose challenges such as regulatory clarity and industry acceptance.
In the global financial system, the United States is at a crucial crossroads with the slow adoption of instant payment networks. With hundreds of banks using the Federal Reserve’s FedNow service, there is momentum.
However, this slow progress, often humorously referred to as “FedLater” in banking circles, stands in stark contrast to countries such as the United Kingdom, China, India and Brazil, which have successfully implemented instant payment systems.
Ripple’s XRP: Instant Payments Still a Far Goal
The current system, despite handling a staggering 30 billion payments last year, suffers from limitations. Its closure on weekends and the possibility of delays of several days in the accessibility of funds highlight the pressing need for a more efficient system.
This need becomes even more pressing for millions of Americans living paycheck to paycheck, for whom a day late can mean financial distress. The United States’ answer, FedNow, promises 24-hour availability of funds for various transactions, which is a significant improvement over the traditional system. However, integrating this system requires time, investment and development of user experience software, fraud controls and other systems.
Large banks such as JPMorgan Chase and Bank of New York Mellon are gradually adopting this new network. The result is a mixed system in which some banks offer limited instant payment services and others have not yet joined in. For this reason, FedNow has only managed to onboard about 300 lenders.
Although FedNow was designed to facilitate quick bill, payroll and other common transfer transactions, its slow adoption has created a niche for financial services such as payday lenders and check cashing stores, often with high costs for consumers.
Even Michael Barr, Vice Chairman of Supervision at the Federal Reserve, admitted that widespread access to instant payments remains a distant goal:
“We are conducting very basic research on new technologies around distributed ledger technology, using encryption techniques to send and receive payments. Such basic research could help us continue to innovate… Research is important because we could discover ways to be much more efficient with the payment system, and the efficiency of the payment system can help banks, households and businesses,” Barr added.
“This gap in the American financial system underscores the urgency of a more efficient solution,” Barr further explains.
Is Ripple’s XRP the Solution for Instant Payments?
Ripple’s XRP emerges as a potential game changer. Ripple uses XRP to facilitate fast and profitable cross-border transactions. As the traditional banking system grapples with the complexities of instant payments, XRP blockchain technology offers a streamlined alternative.
Integrating XRP could be especially beneficial for community banks and their customers. Stu Alderoty, General Counsel of Ripple, highlighted the ongoing dialogue within US financial institutions regarding their challenges with cross-border value transfers. These include exorbitant fees and long processing times.
Ripple’s XRP Advances Internationally
The company uses XRP as a key component of international money transfer operations. It is an intermediary currency to facilitate conversion between different fiat currencies, such as converting US dollars to Mexican pesos.
However, the path to adoption of new technologies like XRP is challenging. Regulatory clarity and greater acceptance in the sector are vital for widespread adoption.
By Audy Castaneda
