With a 50% increase in SMEs engaging in cross-border transactions, Ripple's solutions are crucial as they help mitigate issues like high transaction costs and slow processing times.
Blockchain startup Ripple is providing a massive opportunity for local banks while offering them enhanced cross-border payment services for SMEs. Lately, with the rise of SMEs exporting their products to foreign markets, there has been a growing need for effective and cheap cross-border payment solutions.
Moreover, Mastercard's 2023 Borderless Payments Report shows a 50% surge in SMEs engaging in more cross-border transactions in 2023 as compared to 2021. These businesses contribute to over $17 trillion in global transactions. However, the legacy international payment solutions have been slow, thus presenting some problems for SMEs.
According to Ripple's report titled "Big Opportunity in Small Business Payments" released recently, the adoption of blockchain technology payment solutions will be a perfect opportunity for local banks. These solutions can mitigate the problems associated with old and traditional financial methods. As per the recent report by Crypto News Flash, Russia's central bank is already working with Ripple while using XRP for cross-border settlements.
Current challenges such as inflation, geopolitical tensions, supply chain issues, and increased interest rates compound further with these obsolete systems. Furthermore, the time taken to complete the cross-border payment ranges from 3 to 5 business days. This affects the business relations with the vendors and suppliers, and cash flow management, and may lead to loss-making ventures.
Also, international payment service charges vary from 2 to 3 percent on the transaction value, thereby unbending operational costs. In addition, a third of these SMEs face compliance pressures while dealing with several currencies.
Thus, local banks should be well-equipped to handle these challenges because they can easily incorporate modern payment systems into already existing frameworks. Hence, Ripple Payments offers local banking institutions a packaged solution to improve their cross-border payment services.
It also enhances the speed of settlement and decreases cost and this allows local Banks to facilitate effective and efficient payment solutions to SMEs. The solution also meets all international regulatory requirements concerning the anti-money laundering (AML) and counter-financing of terrorism (CFT) rules, for safe global transactions.
XRP, the native currency of the Ripple Payments network, can complete these transactions, hence playing a very important role. XRP functions as a bridge currency in cross-border payments while offering instant settlements at lower charges between different fiat currencies. Through the efficient use of XRP, local banks can eliminate pre-funded nostro accounts, resulting in cheaper and faster cross-border transfers, per the CNF report.