On Thursday (October 8), Ripple announced a new service (currently in beta) named “Line of Credit” that allows financial institutions on RippleNet to use XRP to make fast and low cost cross-border payments for their customers and then pay Ripple back at a later time.
In its blog post, Ripple started by explaining the problem this new service was designed to solve:
“Limited access to working capital is one of the biggest barriers to growth for many companies. Unlike incumbents who have large balance sheets that allow them to scale their business quickly, many fintechs and small and medium-sized enterprises (SMEs) lack the capital and resources to compete.
“Faced with stalled growth, customers turn to creating bespoke credit arrangements – with each partner, in each destination market. Each arrangement requires additional overhead and management, making it a slow, burdensome and an ultimately inefficient process.”
Once a financial institution has received a line of credit from Ripple (“for a small fee”), it can “use XRP to complete instant, low-cost cross-border transfers” at a rate that is locked in “at the time of the payment” and then repay Ripple “on a fixed repayment schedule.”
It is worth pointing out that this service is only available to “eligible institutional RippleNet customers, and not by consumers, retail customers, or the general public.” Also, it may not be available in all jurisdictions.
Asheesh Birla, General Manager of RippleNet, had this to say:
“Early customer feedback on the Line of Credit beta is showing that the service is helping money transfer service businesses make global transactions even more affordable for their customers.”