Can XRP Become the Standard for International Payments?

Introduction

In the rapidly evolving world of digital finance, cross-border payments remain one of the most inefficient and costly processes. While globalization has made international trade and remittance commonplace, the underlying financial infrastructure is still largely reliant on outdated systems. These traditional processes are slow, expensive, and opaque, especially for small and medium enterprises and individuals.

Enter XRP, a digital asset developed by Ripple Labs. Unlike Bitcoin or Ethereum, which focus primarily on decentralized applications and stores of value, XRP was created with a very specific purpose: facilitating fast, affordable, and scalable international payments. But can XRP truly become the standard for international payments? This article explores the technical features, adoption progress, regulatory landscape, challenges, and prospects of XRP in this context.

The Problem with Traditional Cross-Border Payments

Before analyzing XRP’s role, it’s important to understand the inefficiencies in today’s international payment systems:

1. Slow Settlement Times

International wire transfers often take 3-5 business days to settle. Delays arise from intermediary banks (correspondents), time zone differences, and local regulatory checks.

2. High Costs

Fees can range from $15 to $50 per transaction, not including unfavorable exchange rates and hidden charges. These costs are disproportionately felt by individuals and small businesses.

3. Lack of Transparency

Customers often don’t know how long a transaction will take, what route it will follow, or the final cost.

4. Limited Access

Traditional financial institutions don’t serve everyone equally. 1.4 billion people remain unbanked, many of whom rely on expensive remittance services like Western Union.

What Is XRP and How Does It Work?

XRP is the native cryptocurrency of the XRP Ledger (XRPL), an open-source, decentralized blockchain created by Ripple Labs in 2012.

Key Features of XRP:

• Speed: Transactions settle in 3-5 seconds.
• Low Cost: Transaction fees are fractions of a cent.
• Scalability: The XRP Ledger can handle 1,500 transactions per second (tps), compared to Bitcoin’s 7 tps and Ethereum’s ~15 tps.
• Energy Efficiency: Unlike proof-of-work coins, XRPL uses a unique consensus protocol, making it environmentally sustainable.
• Liquidity Bridge: XRP can act as a bridge currency between two fiat currencies, eliminating the need for pre-funded nostro/vostro accounts.

Ripple’s Vision: RippleNet and On-Demand Liquidity (ODL)

Ripple Labs aims to modernize global payments through its RippleNet network and On-Demand Liquidity (ODL) solution, which uses XRP as a bridge currency.

What Is RippleNet?

RippleNet is a financial network that connects banks, payment providers, and digital asset exchanges. It enables real-time, traceable, and cost-efficient payments.

On-Demand Liquidity (ODL)

ODL allows participants to use XRP to source liquidity on-demand instead of pre-funding accounts in destination currencies. For example:

• A US company wants to pay a supplier in Mexico.
• It sends USD to an exchange that converts it to XRP.
• XRP is sent across the ledger and instantly converted into MXN at a Mexican exchange.
• Settlement happens in seconds without the need for pre-funded accounts.

This model provides speed, cost-efficiency, and reduced capital requirements.

Adoption and Use Cases

Financial Institutions

Ripple has partnered with hundreds of financial institutions worldwide, including:

• Santander
• PNC Bank
• Standard Chartered
• SBI Holdings (Japan)
• Tranglo (Asia)

These partnerships don’t always require the use of XRP, but ODL adoption is increasing steadily.

Remittance Companies

Ripple has made significant inroads in the remittance market, where speed and cost-efficiency are critical. Companies like MoneyGram (prior to their paused partnership), Tranglo, and Azimo have leveraged ODL for international money transfers.

Developing Economies

XRP’s ability to act as a bridge currency is particularly valuable in emerging markets where local currency liquidity is low or FX markets are inefficient.

XRP vs. SWIFT: A Modern Alternative?

SWIFT (Society for Worldwide Interbank Financial Telecommunication) has long dominated international payments. It acts as a messaging system between banks, but it does not move money — actual settlements still take days and rely on intermediary banks.

XRP and RippleNet offer several advantages over SWIFT:

That said, SWIFT is not standing still. Initiatives like SWIFT gpi and ISO 20022 integration aim to modernize the network. XRP must continue to innovate to stay ahead.

Regulatory Landscape

The SEC Lawsuit

One of the biggest challenges to XRP becoming the standard has been its ongoing legal battle with the U.S. Securities and Exchange Commission (SEC). The SEC alleged in 2020 that XRP was an unregistered security, leading to delistings from major exchanges and uncertainty about its future.

However, in July 2023, a U.S. judge ruled that XRP is not a security when sold on public exchanges, giving Ripple a significant victory and clearing a major regulatory hurdle.

Global Clarity

While the U.S. has had a complex regulatory environment, many other jurisdictions have embraced XRP:

• Japan (via SBI Holdings) treats XRP as a cryptocurrency, not a security.
• UK and EU have created regulatory sandboxes where digital assets can be tested for real-world use.
• Middle East and Southeast Asia have shown increasing openness to Ripple’s technology.

Challenges to Adoption

Despite its potential, XRP faces several key challenges:

1. Regulatory Uncertainty

Although the U.S. court ruling provided clarity, the broader crypto industry still lacks unified global regulation, creating uncertainty for banks and financial institutions.

2. Volatility

Like all cryptocurrencies, XRP’s price can be volatile. This makes some institutions hesitant to use it directly for settlement, despite ODL’s near-instant conversion model which mitigates exposure.

3. Competition

XRP is not the only player aiming to revolutionize cross-border payments. Competitors include:

• Stellar (XLM): A fork of Ripple with similar goals.
• CBDCs (Central Bank Digital Currencies): Governments are exploring their own blockchain-based currencies.
• SWIFT gpi and ISO 20022: Modernized systems aiming to reduce XRP’s unique advantages.
• Other crypto networks like Algorand and Quant, which are also building payment infrastructure.

4. Public Perception

The crypto community has a mixed view of XRP. Some see it as too centralized or corporate-driven, while others appreciate its real-world utility.

Opportunities

Despite these challenges, there are several reasons to believe XRP could become a standard:

1. First-Mover Advantage

Ripple and XRP have been targeting the cross-border payments market for over a decade. This gives them an edge in terms of partnerships, integrations, and real-world testing.

2. Growing Institutional Adoption

Ripple is building a strong base of institutional users who appreciate the performance benefits of XRP and ODL.

3. Interoperability

Ripple is focused on ISO 20022 compliance and integration with existing financial systems — crucial for institutional adoption.

4. Sustainability

XRP’s energy-efficient design is becoming increasingly important as institutions seek to reduce their carbon footprint.

The Future Outlook

Can XRP truly become the standard for international payments? The answer depends on several dynamic factors:

• Regulatory clarity in the U.S. and globally
• Wider adoption of ODL by banks and payment providers
• Continued performance and scalability of the XRP Ledger
• Competition from other blockchain networks and legacy systems
• Public trust and brand strength in a rapidly evolving crypto landscape

If Ripple can continue to expand its network, enhance its product offerings, and navigate the complex global regulatory environment, XRP is well-positioned to become a dominant force in the future of cross-border finance — if not the standard itself.