Alibaba(NYSE: BABA), one of the largest ecommerce platforms has recently announced that it would be adopting the use of blockchain technology to improve its payment system. One of the greatest challenges that have faced online retailers globally is the issue of cross border payments. These businesses have traditionally relied on centralized payment systems such as the use of credit and debit cards and other payment models facilitated through financial intermediaries. However, with the dawn of blockchain technology and cryptocurrencies, there has been a lot of interest in their application to make such payments faster and more efficient.
One of the most featured conversations this week has revolved around the relationship between Alipay, Gcash, Standard Chartered and Ripple. It has been speculated that the new blockchain based remittance system recently announced by Alibaba is based on Ripple. Alibaba, through its payment service Alipay Hongkong completed a demonstration in partnership with Gcash and Standard Chartered in which they were able reduce the time taken to remit funds between the Philippine and Hongkong to 3 seconds. The remittance was enabled through the first blockchain based e-wallet for remittance service to be created. The system allows all the three parties (Alipay, Gcash and Standard Chartered) involved work in parallel on a shared ledger for increased efficiency, with Standard Chartered acting as the settlement bank.
Standard Chartered has already adopted the use of the Ripple network to facilitate its cross border transactions. The bank started with enabling transactions between a few currency pairs and is progressively working to provide up to five more pairs by the end of 2018 by extending the use of the Ripple network. The platform allows for round the clock, fast and competitively priced transactions with competitive exchange rates.
Standard Chartered’s partnership with Ripple is however not a guarantee that the Alipay/Gcash partnership is based on Ripple as well. In fact, the technology used for this service has been developed by Ant Financial and Alipay. Alipay has been previously mentioned as having set aside up to USD 14 billion to facilitate the creation of its own blockchain. While XRP’s cross blockchain functionality has the capability to enable the service, Ripple plays no role in the partnership. The partnership is more likely to be between Alipay and Gcash with Standard chartered facilitating settlements between them.
The partnership between these companies is anticipated to increase access to financial services by creating an opportunity for the over 1.7 billion people that have mobile phones but lack bank accounts by providing them an avenue through which they can transact and make payments between jurisdictions that are supported by the network.
Cryptocurrencies have been in the past viewed as an alternative to banking services provided by traditional financial institutions. However, Standard Chartered’s role in Alipay and Gcash’s remittance system is a clear demonstration of how financial institutions can leverage blockchain technology to expand their functionality and expand their reach in the market