Money transfer with a crypto currency

Genuinely useful, or virtually useless? Would you trust a crypto currency with your money transfer?

In the second of a four-part series, Markus Sander tests the latest payments innovations. Last week Markus shared his experience using mobile application payments. This week: crypto currencies - from Ripples to rupees.

Two US credit institutions recently announced its willingness to integrate a virtual currency network into its cross-border remittances business. This move comes a few months after the first German bank made their plan public to integrate the same network. Called Ripple, it is an innovative open source payments system and currency exchange that enables brokering between Ripples (virtual currency, code XRP) and any store of value type, for example fiat currencies, commodities, loyalty schemes such as frequent flyer miles and crypto currencies including bitcoin, litecoin, and peercoin. Ripple Lab, the firm behind Ripple, defines XRP as a bridge currency which provides a network and global payments infrastructure rather than establishing a new currency.

My mission was to pay back the lunch-money I owed to a colleague who had moved to India. Exchange Euros into rupees and transfer them into a bank account in India – simple!

MY USER EXPERIENCE

How to get Ripples?
Living in Germany and funding an anonymous payment network are two terms that are almost mutually exclusive. The Ripple infrastructure requires gateways that are able to fund accounts or connect a platform to the network. In Germany you cannot use your credit card to buy Ripples and there are (at the time of writing) no local gateways that allow accounts to be connected to the network. That leaves one option - buy bitcoins (BTC) and convert them into Ripples by transferring them from wallet to wallet, so I had to get BTCs first.

But how on earth do you get hold of bitcoins in the first place?
There are several platforms available in Germany where you can buy and sell BTCs. I signed up for my first-ever digital wallet, registered for the exchange and validated my bank account with a micro-transaction via direct debit. The validation involved another third party platform which enabled the transaction without me needing to log into my bank account. Finally, after the account confirmation arrived, I was able to buy my BTCs.

I bought 0.2 BTCs from an anonymous source and then waited the mandatory two weeks (the waiting period is only required for the first transaction) before being able to transfer my first bitcoins from the exchange into my own wallet and fund my first ripple account.

Finally! Making the transaction to India
The exchange and actual transaction to India was the easy part: I entered the Ripple address, currency, amount and the transfer seamlessly reached the destination account. Foreign exchange conversion is done on a best-offer basis or you can request a specific price for the currency conversion.

What did I learn?
Once you get a fiat currency into the system, the transaction itself is easy, convenient, intuitive and cheap. However, getting a fiat currency into the system involved four providers and felt like an epic journey!

Some gateways already enable this type of payment and a whole new ecosystem is waiting for developers to start building channels and integrating applications. For industry professionals, the Ripple network can be compared to CLS (continuously linked settlement) in combination with SWIFT (in one entity) with a smart system that enables specific payment related functionalities in the network itself.

Will it catch on?
I’d like to think so, but it will take time in the current format. Using the Ripple platform is still quite restricted, account funding was a struggle and gateways are in the process of being set up. A great concept but it needs refinement.

Over to you.
Have you used virtual or cryptocurrencies? If you have, share your experience and verdict. And even if you haven’t, tell us what you think of the potential for bitcoin, Ripple and others.