Blog article
See all stories »

Ripple and The Uberization of Banks

What I find interesting of Ripple that I don't read much about is that it basically proposes a "uberization" of the banking system: What corporate users need are funds to make their payments, and those funds do not necessarily come from one bank. I just finished reading a quote from the CEO of DBS Bank that "in the future people will not need a bank; they will need banking."

What I think is that any bank can "bid" to fund that payment using the Ripple blockchain as the network where "negotiations" happen.

So far I read papers talking about Ripple and FX, i.e., that Ripple is good for cross-border payments in that it reduces the problems, costs, and latencies of correspondent banking. Market makers-from what I understand- play a role by offering the best FX fees to win the deal. My suspect is that this is just the tip if the iceberg of what Ripple really intends to offer: Market makers will be those players (traditional banks and new entrants) that are able to intercept a financial need from a company (e.g., payment, loan, insurance, letter of credit, guarantee, FX) and offer the solution at the best combination of price/service.

So, just like Uber makes available to the customer the use of the vehicle in a pay-per-use mode, similarly Ripple will do for financial services: Get the product/service to the customer from the best offer.



Comments: (3)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 29 January, 2016, 16:13Be the first to give this comment the thumbs up 0 likes

When I read this post, I was reminded of MoneyAisle and TransFS, two new startups that had launched back in 2008.

MoneyAisle hosted live bids from banks for Certificate of Deposits and many other retail banking products. More in my blog post titled Seller-Side Auctions for eBay-Weary Buyers. When I just checked, this company seems to have shuttered down.

TransFS found credit card processors for SMBs offering the best rates. More in Seller Side Auctions Gaining Traction: Part-2. When I just checked, this company seems to have pivoted to a financial advisor.

I know timing is everything but I'm keen on knowing your thoughts on

  1. What is Ripple's secret sauce that gives it a better chance at succeeding now;
  2. How easy is it for corporate ERPs to be modified to work on the fly with any random bank that wins a particular bid without the prior existence of a C2B interface with that bank.  

PS: Hyperlinks of my blog posts removed to comply with Finextra Community Rules but the above mentioned posts will appear on top of Google Search results when searched by their titles.

Dharmesh Mistry
Dharmesh Mistry - AskHomey - Reading 16 February, 2016, 08:01Be the first to give this comment the thumbs up 0 likes

Enrico I think you will find that quote from DBS is actually a really famous quote from some guy called Bill Gates?


Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 February, 2016, 08:301 like 1 like

The same quote was used as the title of an article written by the Chairman of a large Public Sector Bank in India a few days ago. Just as “People Don't Want a Drill, They Want a Hole”, people never wanted banks or even banking. They want solutions to their financial problems. Banks and nonbanks (e.g. pawnbrokers, payday loan providers) have both been providing such financial solutions. As I pointed out in Calling B.S On Banking The Unbanked, banks and nonbanks have coexisted for literally thousands of years. With the proliferation of fintech, the list of nonbanks has increased. As with the rise of competition in any industry, some incumbents will die, some newcomers will become big, some incumbents will become bigger, some newcomers will fade away. I don't see anything drastically different happening in finserv either.

If bank honchos keep using this line as if it was invented today, I think it's to appear hip and cool to the Millennials among their employees and customers:)

Now hiring