Ripple expects On Demand Liquidity’s transaction volume to rise

According to Ripple, they expect demand liquidity transaction volumes to rise in the future with their new focus on the remittance and payment needs of small and medium-sized businesses, with Ripple opening new corridors this year and expecting unprecedented support for RippleNet. According to the publication, the crisis caused by the coronavirus pandemic has brought about a "new normal". As a result, the need to digitize cash has been highlighted, and the demand for electronic payments has increased.

Ripple says that during the current crisis some countries have seen an 80% increase in digitalization. Of that figure, digital remittance payments have increased by 40%. This shows, according to Ripple, that there is a strong demand for global digital payments that cannot be met by the limitations of the current system:

The underlying infrastructure is siloed and complex, leading to significant delays and high transaction fees.

This is why the On Demand Liquidity payment solution is presented as an alternative. According to the publication, ODL uses the XRP digital token which is much cheaper, faster, eliminates middlemen and is cost-efficient than pre-financed accounts:

ODL’s benefits for eliminating pre-funding are especially important during times of crisis due to the exposed risk and increased volatility.

In addition, the publication refers to a specific case in which ODL was crucial. According to Ripple, during the crisis the value of the Mexican peso fell by 20% against the USD. Ripple’s clients who used ODL were more protected from this phenomenon because of its speed in making cross-border payments.

Ripple puts new focus on SMEs

For these reasons, the payment solutions company has decided to continue supporting individual low-cost, high-frequency transactions. Ripple stated:

(…) we are reducing emphasis on large treasury payments-which are traditionally used to fund businesses and services in the absence of real-time transfers-to support individual, low-value transactions, addressing the growing need in remittances and SME payments. This may reduce overall ODL transaction volumes.

In the crypto community, the announcement was met with criticism. Some users claimed that the treasury payments Ripple refers to are made to MoneyGram. As reported by CNF, a possible purchase of MoneyGram by Western Union could be under negotiation. This could lead to reduced payments and reduced transaction volumes. A community member said:

ODL volume goes down after rumour of acquisition of mg by western union. Or Maybe Ripple does not want to pay more incentives to mgi (MoneyGram investors). We will see how this plays out.

Despite this, the company expects significant growth in ODL adoption and increased business support for RippleNet. Ripple announced that it will open new payment corridors in 2020, but did not provide further details.

Author : Reynaldo