Allowing money to move around the world as easily and cheaply as an email is a crucial part of building a level economic playing field that works for the poorest in the world as well as the wealthiest.
But right now the infrastructure through which money moves does not allow this to happen because it is outdated, disconnected from the internet and is not available to all.
But levelling the playing field depends on interoperability – the ability of all networks and devices to work smoothly together without annoying disconnections and technological hiccups.
Solving this problem will allow money to move around the world as quickly and easily as sending a picture to your granny electronically. It has the potential to provide billions of people in the world’s poorest communities with access to the global economy, which in turn is likely give rise to new businesses and industries, as well as increase financial inclusivity, a commitment made by the G20 group of leading industrial nations.
But the technology that has the power to do this already exists: it is called Interledger Protocol (ILP), which, though it sounds less than glamorous, is an open-source code that developers can use to enable instant payments across any ledger or network.
It is a standard – a globally accepted way to operating such as HTTP or the World Wide Web – that connects all currencies and all networks, whether they are new, like blockchains, or old. That means everyone can use their preferred method and means of payment and still efficiently transact with others who chose differently.
Currently, most payments are made from one bank account to another, sometimes with a network like PayPal acting as an intermediary. But what if a payment could move from a digital wallet containing a digital currency like Ripple (XRP), to a PayPal wallet denominated in euros, or to a traditional bank account in Chinese yuan, and back into a mobile wallet?
And what if all of that was done instantly and seamlessly? ILP can make this a reality, which has huge implications for the millions of the poor who are unable to access bank accounts in parts of Latin America, Africa and South-East Asia.
In Tanzania, for example, only 2% of the population has access to banking services or products. Even those with a bank account still cannot send and receive international payments easily. High costs and processing times of several days make many business opportunities untenable. An Airbnb host in Dar es Salaam, for instance, might be charged a $20 fee on a $29 room payment. The result is that many people are excluded from the global marketplace simply because of the costs.
Those without a bank account have been able to access digital financial services via mobile phones for the past decade or so. These services, along with mobile wallets, have flourished in emerging markets like Kenya and Pakistan.
Kenya’s M-Pesa is one of the best-known mobile wallets, and now leads in mobile money transfers in developing nations. If the world continues to adopt ILP, it will one day be possible to make efficient, low-cost value transfers directly into the mobile money accounts of hundreds of millions of people around the globe.
With this in mind, Ripple, in partnership with Dwolla, ModusBox, Software Group and Crosslake Technologies, with funding and support from the Bill & Melinda Gates Foundation, has developed a new open-source software organizations can use called Mojaloop.
This can be used to create a real-time, interoperable payments platform on a national scale that can bring essential financial tools to the world’s poor. Mojaloop can be used to connect customers with mobile wallets to sellers, banks, and government offices countrywide – accelerating progress toward a truly inclusive economy.
Using ILP to connect the mobile wallets of the financially excluded – no matter where they live or what currency they use – to merchants, payments providers, governments and mobile money providers worldwide will enable the poor to make payments to anyone, anywhere, and give millions more people access to the global digital economy.
By Stefan Thomas, Ripple Chief Technology Officer (CTO)