JPMorgan Cites XRP and Ripple as Players in Unlocking $120B Value Trapped in Cross-Border Payments

JPMorgan, a prominent global financial services firm, released a report concerning unlocking $120 billion value in cross-border payments, citing XRP and Ripple.

Notably, the report sought to elaborate on how banks could leverage central bank digital currencies for corporate purposes.

JPMorgan highlighted that multinational corporations transfer approximately $23.5 trillion internationally each year. The firm noted that this value constituted around 25% of the global GDP. 

However, to facilitate these massive transactions, the multinationals depend on cross-border payment systems that fall short in cost-efficiency, speed, and transparency. 

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Furthermore, JPMorgan mentioned that these sub-optimal processes generate substantial annual transaction costs of $120 billion. Also, it noted that the system triggers additional expenses related to foreign exchange conversion, trapped liquidity, and delayed settlements.

Ripple and XRP Among Efforts to Solve Cross-border Payment

Meanwhile, JP Morgan noted several private sector entities like Ripple, SWIFT, and the CLS Group have undertaken efforts to address the challenges of cross-border settlement and delays.

As for the CLS Group, the report noted that it features a multi-currency FX net intended to eliminate settlement risks. However, the solution only supports 18 currencies, with significant challenges to adding more.

Furthermore, the report highlighted that SWIFT established a system to enhance transparency in cross-border payments and reduce processing time.

However, it pointed out that SWIFT still depends on the antiquated correspondent banking system involving multiple intermediaries. Consequently, the challenges of trapped liquidity and settlement risk persist.

On the other hand, JPMorgan acknowledged the real-time nature of Ripple’s cross-border payment infrastructure that uses XRP as a settlement instrument. The issue it cited with Ripple’s system is cryptocurrency’s inherent volatility. 

“High volatility of XRP leading to limited willingness from banks in using it to facilitate payments,” the statement read.

As a result, JPMorgan concluded that the efforts of various private sector entities to solve the challenges in cross-border payments have been merely a partial success.

“We are yet to see a scalable and seamless solution that can work across countries, currencies, and payment systems,” the report claimed.

In response, JPMorgan proposed that a multi-currency central bank digital currency (mCBDC) network could serve as a viable blueprint to address multiple issues concurrently. 

It claimed the approach has the potential to make 24/7, real-time cross-border, cross-currency payments a tangible and achievable reality.