In this posting at TGSL we see that Ripple is launching a cross-border payments platform called On-Demand Liquidity (ODL) in partnership with the Dubai-based Pyypl. Most readers will know of Ripple, the San Francisco-based fintech, which is one of the trailblazers for blockchain payments. Pyypl is a developer of a blockchain-based financial technology platform designed to offer non-bank digital financial services by mobile phone. The release does not explain why the launch is limited to MENA and excludes sub-Saharan Africa, but that is likely more an issue of scale, timing and licensing, which we would expect to change over time.
‘The region is considered one of the largest payment centers in the world… Blockchain company Ripple has announced the launch of On-Demand Liquidity (ODL) payment service in the Middle East and North Africa (MENA). The blockchain company Pyypl will be the partner for the platform deployment…
The Middle East is home to two of the three largest remittance corridors in the world, according to consultancy McKinsey. The volume of transactions between the UAE and Saudi Arabia in 2020 reached $ 78 billion and amounted to 7% of the total GDP of the two countries. The region has experienced a rapid digitalization in the past year. The Aber project was launched – a common digital currency between Saudi Arabia and the UAE; Buna payment platform and AFAQ system, connecting real-time settlements of six Gulf countries.’
Since we have not had a briefing on the new platform, some of the details mentioned are not especially clear. These points include the lack of a pre-funding requirement and the use of Ripple’s cryptocurrency XRP as a bridge between fiat and digital currencies, with an exception of UAE itself. So, perhaps we will get some additional clarity at some future point during an industry event (such as the upcoming AFP). The article mentions companies as well as low-income individuals across the region, so it seems to be solving for several use cases. This would be especially good for SMEs given liquidity as an ongoing business challenge in these segments.
‘In traditional cross-border payments in the region, organizations must keep “pre-financing” in a bank account. These funds do not participate in the transaction, but are blocked in the company’s account. ODL service eliminates the need for pre-financing, which will increase the liquidity of companies, according to a press release… Pyypl’s goal is to bring digital payments to billions of low-income smartphone users across the Middle East and Africa. The ODL platform will help Pyypl reduce international transaction fees for the company’s customers.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group