Can Ripple (XRP) disrupt the Commonwealth Bank of Australia and OFX Group Ltd?

I read somewhere that investing in cryptocurrencies today is like investing in the internet in the 1990s. There will be big winners and big losers, but the underlying blockchain technology supporting some of these cryptocurrencies will most likely be a game changer.

Consider the business of transferring money across the world. Western Union has been prominent in it and so have the big banks Commonwealth Bank of Australia (ASX: CBA), Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB).

These traditional global transfer systems can take up 3 days to process the transaction and it is expensive because currencies often first have to be converted to a common global currency like the US dollar.

That was supposed to be the OFX Group Ltd (ASX: OFX) point of differentiation. OFX specialises in global money transfers made within one day at rates that are cheaper than the big banks.

In fact, OFX provided a positive trading update to the market today showing that the volume and average value of transactions had increased in 2H18 compared to 1H18.

What I found interesting in the update, was OFX’s view of their competitive advantage in the market as shown below.



Having a cheaper service compared to the big banks underpinned by a strong risk management framework with excellent client service is clearly what makes OFX competitive and they are reaping the benefits of that.

Now consider Ripple (XRP), the cryptocurrency with a scalable network that can enable real time payments and money transfers anywhere in the world. The maximum time it takes for it to process a global payment is 4 seconds. That’s quick!

According to its website, Ripple consistently handles 1,500 transactions per second, 24×7, and can scale to handle the same throughput as Visa.

In my opinion, Ripple’s scalability and transfer speed could really disrupt OFX and other more traditional money transfer businesses but it could also benefit them if they can successfully adopt the technology. Moneygram did just that by announcing a partnership with Ripple earlier this year.

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Motley Fool contributor Kevin Gandiya has no position in any of the stocks mentioned.

You can follow Kevin on Twitter @KevinGandiya.

The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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