There has been a lot of speculation lately about what impact certain companies who have partnered with Ripple can have on the price of XRP. Let's be honest, everyone who has anything invested in XRP wants to see the price of XRP rise. In a small way, all current XRP investors could be viewed as mercenaries: we are motivated to take part in the asset by the desire for private gain. Those in the #xrparmy are willing to get a little bloodier than the rest. However, all XRP investors have the same common goal: a higher price for XRP.
The Impact of Partners
On February 26, 2018, I responded to a thread in the XRPChat forums about the potential impact of a Western Union (WU) partnership if WU uses xRapid/XRP for all of it's customer-customer transactions. I believe an analysis of WU's numbers and potential impact on the price of XRP will help XRP investors see just how much one partner can have positive momentum for XRP. Where assumptions are made, I will specifically state those assumptions.
Let's look at a summary of WU's numbers from 2016:
I stated in my original post in the XRPChat forum that for this analysis I am not concerned about WU's revenues (though, I made the argument there for the cost savings WU could see by using xRapid). I want to know what is potentially available to ride the xRapid rails and see XRP being used.
1. The very first item that everyone should see is that WU had $80 billion in principal money moved between customers, $72.5 billion of this amount was cross-border transactions, according to WU's 2017 10k . This is a huge sum of money. There are going to be those who say that amount is not much, but I hope to prove to you that $72.5 billion moving across xRapid is a big deal.
2. 268 million customer-customer transactions. This is a LOT of transactions. This puts WUs average customer-customer transaction at approximately $300.
3. WU completes transactions in 130 currencies. In a previous blog I spoke about how there are 180 circulating currencies recognized by the United Nations and argued that for xRapid/XRP to be successful there would need to be fiat/XRP pairs with a vast majority of those currencies. WU, alone, brings 130 of those currencies to RippleNet. This has significant implications for XRP/fiat liquidity and further use of XRP by banks and other FIs. Please do not let the importance of this one fact slip by you.
4. WU has Direct to Bank money transfers available in 50+ countries. WU already has the infrastructure necessary to link their client platforms to banks in over 50 countries.
5. WU has over 550,000 Agent Locations. We could call these "little banks" that are a gateway to fiat liquidity entering into the Ripple system.
6. WU has over 100,000 ATMs and customer Kiosks. Once again, an important note of available infrastructure for liquidity corridors.
What do these numbers look like for 2017? Published on February 22, 2018, WU's 2017 10k states:
- $81.8 billion in customer-customer transactions (2% growth vs. 2016)
- $74.5 billion in cross-border transactions (1.4% growth vs. 2016)
- 275.8 million customer-customer transactions (2.8% growth vs. 2016)
What impact can WU have on the price of XRP? Assuming WU were to use XRP for all of their cross-border transactions, we would divide $74.5 billion by 365 days in one year, and see that WU would provide an additional $204 million in XRP trading every day of the year. According to Live Coin Watch, as of this writing, XRP has just over $400 million in 24 hour trade volume, including the Korean exchanges. What impact would an additional $204 million in volume added to that $400 million be on the price of XRP? And this would happen every day, 365 days per year.
In my original post I argued that more people would transfer more money because the ease of use and less expensive costs that are expected with xRapid deployment. Look again at the example of cell phones. When cell phones first came out service coverage was not great, with most coverage being in larger cities, plus the phones and service were expensive. However, as coverage became available across the United States and the cost to purchase and use cell phones decreased, more people have started using them. Nearly every person I know has a cell phone (and has cut their land-line). Can you see this same possibility with the transfer of money across borders as the experiences becomes faster and less-expensive? Using cell phones as the example, could WU see transaction amounts grow to $100 billion? $150 billion? $200 billion? What does this segment look like when more people can send more money more efficiently for less cost?
Understand, this is "just" one company. This one partnership opens the RippleNet to 50 countries, and over 650,000 point-of-contact locations, providing liquidity in 130 currencies with a dollar value of cross-border transactions of $74.5 billion (in 2017). What if more companies use xRapid?
The Tip of the Iceberg
On February 28, 2018, Finance Magnates reported that Woori Bank of South Korea plans on using Ripple tech for overseas (cross-border) transactions. A Woori Bank official stated that using Ripple for cross-border transfers was "much quicker and cheaper than existing remittances..." Additionally, "Since the test results were good…Several banks, such as two or three megabanks and Internet professional banks, are pushing to introduce the practice." This is exactly the news the Ripple community has been waiting for! Woori Bank is not a passive user of Ripple tech, they want others to use the tech too!
Also, on March 1, 2018, Ripple announced a new xRapid pilot with Cambridge Global Payments (CGP), "providing its 13,000 global customers with faster, cheaper, and more transparent cross-border payments." Ripple reports that CGP "handles $20 billion in international transactions annually." Ripple provides a peek behind the curtain with one of their next statements: "As Cambridge and more financial institutions begin to use xRapid to source liquidity..." With each xCurrent and xRapid announcement more liquidity is available to be transferred across the RippleNet. The issue of liquidity is slowly becoming a non-issue with Ripple products as the solution. If all $20 billion that CGP moves can be put on the xRapid rails, XRP will see another $55 million per day in XRP volume added to the WU numbers above (plus MoneyGram, IDT, MercuryFX, and Cuallix).
Understand, CGP did not just sign up with Ripple yesterday. There is a process of talks, presentations, tech meetings, regulations meetings, etc., that need to take place before someone can commit to even doing a pilot, and these events do not happen in a few days.
We do not know how big the "iceberg" of xRapid and xCurrent users are. All we know is what we can see. That said, there is obviously more we cannot see. Asheesh Birla, Ripple's VP of Product, tweeted on February 15, 2018, that "We have more than enough interest in xRapid for the pilot/beta period. We are now working towards full production launch but experience and quality is top of mind for us." Then he says, "Expect more details in the next month regarding dates." Warren Paul Anderson, product manager at Ripple, tweeted about the CGP xRapid parternship, saying, "As product manager working at @Ripple on xRapid/ $XRP, it's been incredibly rewarding to witness such market demand from so many experts in the global payments space!" (emphasis added) There are more companies using Ripple tech and specifically xRapid that we do not know about because of non-disclosure agreements (NDA's). What we can see is truly only the very tip. Now we can begin to ask, "What if Ripple is able to start replacing SWIFT with xCurrent and xRapid?"
Not so Fast, SWIFT
Prior to SWIFT a messaging system called TELEX was used for international funds transfers, according to Investopedia. Unfortunately, TELEX was plagued with problems. These problems included, "low speed, [and] security concerns..." This sounds an awful lot like how SWIFT is being described today. With three- to five-day transaction times, the latest $1.8 billion "mega-fraud" with Punjab National Bank in India (while this was not an issue with the SWIFT messaging system, it does highlight how difficult it can be to track fraud with the SWIFT system, whereas RippleNet keeps a decentralized ledger of every transaction it closes), and admission of other hacks and security issues, SWIFT is beginning to look more like TELEX in a world where a better option exists. Though SWIFT has developed its Global Payment Initiative (GPI), GPI only speeds up the messaging service. There is still the time associated with settlement and counter party trust, all of which xRapid solves.
Investopedia explains that SWIFT gained rapid acceptance and that "Within three years of introduction, SWIFT membership had increased to 230 banks across five countries." How many partners does Ripple already have? How many Ripple partners have been announced in the last few months? How many countries do those Ripple partners operate in? WU is in 50+ countries and is just one company sending cross-border transactions. Like TELEX before, an option exists that has already fixed the issues that are dragging SWIFT to the slow lane: Ripple.
What does 10% of SWIFT Transactions Look Like?
Imagine a world where Ripple is able to garner 10% of SWIFT's volume using xRapid. Honestly, as Ripple tech gains acceptance I believe this will be much higher (who still talks about TELEX?). However, we are going to use 10% across the xRapid rails, leaving the remainder up in the air, at least for the moment.
According to the U.S. Department of Treasury, SWIFT transfers "nearly $5 trillion worldwide each day." This equates to $1.8 quadrillion per year. Let that sink in a moment. 10% of $1.8 quadrillion is $180 trillion, per year. 10% of $5 trillion, is $500 billion, per day.
According to Coin Market Cap January 4, 2018, saw $8.103 billion in XRP trade volume and the price per XRP reached an all time high (ATH) of $3.84 (which includes Korean exchange prices). All this volume can be assumed to be mostly speculative by individuals who were experiencing fear of missing out (FOMO), not purchases for transactional use. Looking at these numbers, the ATH of $3.84 was reached with $8 billon of trade volume, however, the days and weeks leading up to, and since the ATH, have fluctuated wildly and without any consistency. As of this writing, volumes are about where they were prior to the major price increase of XRP during December 2018, yet XRP is holding steady around the $1 mark.
Imagine what the price can do with $500 billion in consistent, daily volume (excluding speculative volume). Now imagine what can happen if XRP is able to attract 20% of SWIFT transaction volume. 30%. 50%. And we haven't even talked about CHIPS and FEDWIRE, nor have we spoke about the myriad of other uses where value can be transferred between two parties using XRP.
How Big is the Entire Transfer Market?
The below graphic is used by permission and was produced by Dario Suveljak, also known as Stedas (Follow him on Twitter and XRPChat. View his website here). This graphic provides an amazing visual showing just how "big" XRP and WU are right now compared to the rest of the global transfer markets. Obviously, XRP has some room to grow before investors ever see its full market potential reached.
Do you see the potential for growth for XRP? Do you think xCurrent customers can easily switch to xRapid (see JoelKatz's comments here) and XRP gain more of the value presented above? What does this mean to you? What price do you see XRP reaching? And after all that, I would say there is still room for digital asset competitors to Ripple(think SWIFT vs CHIPS vs FEDWIRE).
Having said all this, there is something I need for you to do: please stop looking at the charts a million times every day. I know, I went through that phase myself. But I had to stop. XRP is not going to corner the entire global transfer market today, this week, month, or year. So take a break. Come back in a few days and check to see how XRP is doing. It is fun to watch it rise (everyone starts talking about "moons" and "lambos"...just give me my "cabins" and "Jeeps'), but social media loses its mind when the price drops. You will go crazy watching the price all the time. Step away, please. Ripple is playing the long-game with XRP. XRP investors should be playing the long-game, too. Remember, even at current prices, we have only seen the tip of the iceberg.
What Can You Do?
I put out a request for questions on Twitter that the XRP community might want to see answered. I have received several questions thus far but want to provide an answer to this one from @Abn_Stubby (and you should have received your XRP tip via the XRP Tip Bot on Twitter today!):
Let me say that the answer is simple: stay off the sidelines. Stay involved in the community: I am personally involved with XRPChat and Twitter. XRPChat is a wonderful community of individuals who enjoy talking about all things XRP, from the technical innovations to price speculations. Just so you know, there are some unique individuals on XRPChat. Those who introduced me to all things XRP include a royal chicken (@RegalChicken), a bull (@zenkert), an angry looking pickle (@PickleRick), a $50 dollar bill (@XRPto50dollars), and a Chewbacca (@Chewiecoin). Our fan favorite, Hodor, is on XRPChat as well as Twitter and always has great blogs and information for us to use!
On Twitter there is one "personality" who could be considered the "general" of the #xrparmy, Dr. T. Without "the Doc" I am sure my introduction into the Twitterverse would not be what it has been, nor would I know as much as I know now. Thank you!
Saying this, I want to encourage you to branch out of the social media spaces you have been a part of. Over time we start to see what we want to see and miss things we need to see. If we never look elsewhere and engage with others we will continue to see the things we always see as we have always seen them.
Next, research. Go to Ripple's website and read/watch everything you can. I am not a tech guy, but I am striving to understand everything Ripple has to say about its products and XRP. Look up JoelKatz (David Schwartz, Ripple's Chief Crytpographer) on YouTube and watch the interviews he has done. He will always give you more information than you could ever want! When Ripple announces a new partner, look them up. Find their website and see what the press has said about them. If they are a public company in the U.S. look up their 10K's and 10Q's filed with the Security and Exchange Commission. Read as many articles and blogs as you can and watch as many vlogs as you can. Then print or write out items of interest to you, pin them to a board, and try to find connections. Ask questions, search for the answers, then let everyone know what you have found. No one person knows everything about Ripple (unless your JoelKatz!). Together we can find out more and support the XRP community showing others the value we see.
If you can, I would also encourage you to set up a validator and become a part of the decentralization of the RippleNet. I have not done this yet, but I do plan on doing so as soon as I get some extra time to do so (I not only work full-time, but am finishing a second master's degree this semester, too). There is a gentleman on Twitter, Wietse Wind, who has built a Docker container you can use to install Rippled on your hardware or using a cloud-based server such as Digital Ocean. Those who have used the Docker container say it is easy to set up. Here is a link to his website, too.
Finally, HODL. If you are not a trader, then just HODL. We know XRP prices can do three things: go up, go down, move sideways. Any one of those three happening should not be a surprise and should not cause any of us any anxiety. Put a game plan in place that details how you begin exiting XRP when the time is right for you. My plan will not be the same as your plan, and that's okay. Figure out your end-game and help support the XRP community as we cheer our favorite digital asset down the field towards the end zone. There's nothing like celebrating the success of a win with others who are as passionate about winning as you are.