This article was first published on Insights – Ripple
The world is being pushed into a new normal where simple, everyday tasks and functions, often taken for granted, are becoming increasingly cumbersome. This is in no short part due to the ongoing COVID-19 global pandemic, which continues to force many essential operations like finance and payments into the digital realm out of necessity. However, this new paradigm has long been on the horizon, thanks to the overall increasing digitization of our world.
In theory, this shift is by no means unwelcome. Interest and demand in digital payment services is escalating, as people around the world increasingly require access to instant and reliable means of paying and transferring money. Unfortunately, today’s global payments don’t quite facilitate these needed attributes.
Digital payments are essentially just a series of IOUs passed between various financial institutions. This requires institutions across the world to engage in complicated legal arrangements and pre-fund currencies with each other to alleviate counterparty risk created by IOUs. These delays and inefficiencies, especially in such uncertain times, underpin the current correspondent banking system and highlight the need and importance of real-time payments—now.
What Are Real-Time Payments and Why Do They Matter?
Real-time payments combine speed, data and communication in order to execute a payment in a matter of seconds. They grant users immediate access to their funds and instant confirmation of their transaction while providing near instantaneous settlement finality.
The initial desire for real-time payments can be traced back to the rise of “instant” technology, where billions of people now have access to information and experiences on-the-go available in various touchpoints and channels. Already, the snowballing digitization of the world highlighted the demand and need for more efficient ways of settling payments. But during this global health crisis and its resulting economic ramifications, millions of people are facing ...
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Insights – Ripple