Ripple’s WhatsApp-like blockchain superhighway can replace SWIFT: India MD Navin Gupta

Ripple Labs Inc., the San Francisco-based blockchain company behind the cryptocurrency XRP, opened its India office in Mumbai last year as part of its global expansion plans. The company aims to replace the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network, which enables financial institutions globally to share information securely. 

In India, the company wants to tap into the $70 billion market for remittances, says Navin Gupta, managing director for India, Southeast Asia, the Middle East and North Africa. In a conversation with TechCircle, Gupta also talks about the company's blockchain protocol, plans to challenge SWIFT and more. Edited excerpts:

How are Ripple and XRP connected?

Ripple and XRP, though related, are very different things. XRP, the cryptocurrency, came into existence first. Later, some portion of it was lent to Ripple, which is a software solutions company focusing on blockchain. Ripple acts as a separate entity and has its own strategy and business model.

What blockchain solution is Ripple offering?

The company’s primary focus is to target the remittance market globally. What we are trying to do is provide a better and faster alternative to SWIFT, which is used worldwide by financial institutions. 

We are building a message-based superhighway through which money can travel and, mind you, they don’t have to be cryptocurrencies; fiat currencies can also travel via our blockchain protocol. 

We are already working with several banks globally especially in the Middle Eastern region. We also have customers in Africa and Europe who are conducting millions of transactions via our network protocol instead of using SWIFT.

Why do you think Ripple’s blockchain-based solution, RippleNet, is better than SWIFT?

How would you feel if the mails you send stopped at your outbox? With SWIFT it is the same issue. Data shows that nearly 6% of all transactions done through SWIFT fail or are error-ridden. This has a hidden cost of error which is passed onto the banks’ customers. 

The second issue is the cost of liquidity, which is also passed onto the customer. If a bank uses SWIFT, it has to part a certain amount of money with the other bank for the transaction to be smooth and fast. All these issues increase the working capital cycle of the bank as well as the customer.

In contrast, what Ripple’s blockchain protocol allows is an error-free transaction. It works exactly like the WhatsApp Messenger. What we have done is created a message-based superhighway. 

For example, if a bank wants to send money to another, then first it has to add the second bank to its trusted list, as you would do in case of a WhatsApp contact. The backend of the technology checks the name of the bank, account and does due diligence on all the anti-money laundering rules in place.

Then it sends the money, which is received by the other bank. 

The blockchain protocol on both ends matches the transaction in terms of debit and credit and it's over in just three to five seconds. In WhatsApp you send files, here you send money.

Most of these are international transactions. How are exchange rates applied?

Ripple’s blockchain protocol has an exchange programme inbuilt. As soon as a request to send money is received, it checks the rates and applies it on the money. For example, if you are sending pounds, which has to be converted into dollars, then the exchange rates are applied on the sender and then the money gets deposited in dollars only. 

We have also used XRPs in some countries where cryptos are allowed. We are using XRP for transfers between Mexico and the US. In this case, the money sent is first converted into XRPs and then the XRPs are converted back to fiat currencies.

How would that work in India? Cryptos are restricted here, right?

What you have to understand is that Ripple can allow any fiat currencies to be transferred. In India’s case, where cryptos are not allowed, we simply use the first method where fiat currencies travel directly.

The company is just a little over one year old in India. What is Ripple's India strategy and how are you faring?

In line with our global focus, we are looking at the remittance market here. India has the largest corporate and retail remittance market globally worth $70 billion and we are certain we will be able to grab a significant portion of that market with our new technology solution that has worked for other banks. For instance, Swedish bank SEB, which uses our protocol, has seen immediate change in its working capital.

We are working with four banks in India – Axis Bank, Yes Bank, IndusInd Bank and Kotak Mahindra Bank. We are talking to others and soon our list of banks will grow.

The Reserve Bank of India has mandated banks to move to SWIFT. Is there any regulatory hurdle here?

There are some misconceptions here. The RBI doesn’t mandate the use of any technology. It shares the list of compliance requirements that every bank has to follow. And at Ripple we don’t circumvent rules or regulations. We follow the law of the land and, hence, we don’t face any regulatory hurdle in India. 

What we are doing is reaching out to banks to show how it can be beneficial for them. Sometimes banks reach out to us so that they can see our technology at work.

How do you see the cryptocurrency scenario in India?

Regulators have to ensure that cryptos are not being misused and we entirely support that cause. It takes time for a regulator to make decisions and ensure that all tracks are covered and all stakeholders can continue to work in the best of conditions.