As cross-border payment volumes rebound to pre-pandemic levels, global businesses face significant headwinds while grappling with the looming challenge of rising interest rates. Amid these complexities, Ripple Labs’ latest insights into the changing economic landscape reveal their crypto payments solution as a countermeasure.
The main pain points of the economic landscape
In its latest exploration, Ripple delves into the impact of rising interest rates, focusing on its impact on banks and global businesses. The 2023 New Value Report noted that “nearly half of business respondents cited high interest rates as the top challenge for cross-border payments.”
With widespread global impacts, interest rate changes can put pressure on businesses regardless of their geographic base.
Three key pain points faced by businesses in the current economic environment include: First, currency fluctuations can harm economic growth. Ripple believes that the intertwined relationship between cross-border payments and local currency exchange cannot be ignored.
Ripple’s report highlights how rising interest rates exacerbate “the potential for pricing instability” and exacerbate the unpredictability of international transaction costs. They pointed to the possibility of greater losses and asserted, “This possibility of greater losses could hamper investment activity and economic growth.”
Second, the fintech company highlights the high cost of credit and reduced liquidity around the world. The 2022 C2FO Survey highlighted in Ripple’s presentation highlighted that bank lines of credit or term loans remain the primary source of working capital for most businesses.
This liquidity underpins the efficiency of cross-border transactions. But there is an alarming caveat: “As interest rates rise, borrowing costs also rise, leading to less overall liquidity in the financial system and higher cross-border transaction fees.”
Third, Ripple solves the problem of uneven access to financial services. Regional differences in interest rates inherently lead to unequal access to basic financial services such as cross-border payments, particularly for businesses in emerging or developing economies.
Ripple noted that businesses face pressing challenges in regions with high interest rates, which often hinder their ability to participate in international trade or market exploration.
Advantages of Ripple Payment Solutions
In light of the above challenges, Ripple is promoting the possibility that blockchain could become the superior technology for reliable, efficient, and globally accessible payments.
What’s their reason? Deciphering and debunking common crypto myths and harnessing the potential of “blockchain payments” could enable businesses to offset liquidity barriers caused by rising interest rates. This extends to a range of payments: from global treasury payments to supplier settlements.
Ripple promotes its cryptocurrency-enabled payments solution, highlighting its key features: “With Ripple Payments, customers have access to greater working capital while reducing pre-financing requirements, upfront fees, and no hidden fees.” Such solutions The solution promises to resolve transactions in seconds, with an almost non-existent failure rate.
Additionally, the versatility of Ripple’s solutions not only cuts costs and increases efficiency, but also paves the way for business expansion. One of the compelling claims made by Ripple is that it is possible for businesses to “leverage the payment networks that account for over 90% of the FX market,” making it easier for businesses to venture into new payment channels, even those considered challenging .
Given the strong growth of the gig economy—spending is expected to reach a staggering $298 billion and the number of freelancers reach 915 million by 2023—the importance of small spend and geographic coverage becomes even more apparent. As they say, Ripple’s solution can meet the growing demand for efficient, high-volume, small-value payments, potentially allowing the company to gain a stronger foothold in international markets.
In summary, for businesses navigating the choppy waters of economic uncertainty and seeking sustainable growth, Ripple’s crypto solutions may provide a bridge to success. The promise of “white glove service, single API integration, and dedicated customer support partners” seems to be resonating with businesses, even those with minimal exposure to the crypto world.
The company’s Liquidity Hub is one such solution. Just recently, Ripple expanded this offering to enhance user experience, diversify its asset offerings, and expand its global reach.
At press time, XRP was trading at $0.5043, up 0.74% in the past 24 hours.
Featured image from Shutterstock, chart from TradingView.com