ABA Banking Journal - November/December 2016 - 24
SPECIAL REPORT > INNOVATION AND TECHNOLOGY
We believe in the trend of DISTRIBUTED FINANCIAL
TECHNOLOGY as a broader movement.
Not quite, Larsen says. In his view, blockchain is just one
part of a much bigger picture: a whole "internet of value"
that connects multiple blockchains, distributed ledgers and
core systems with a simple, standardized "intra-ledger"
protocol to allow for instant exchange of value across
countries and time zones. Within the context of the internet
of value, he adds, blockchain functions more as a new,
innovative shipping company than the revolutionary shipping
Larsen-a longtime fintech player who previously cofounded and served as CEO of Prosper, a peer-to-peer
lending marketplace and E-LOAN, a publicly traded online
lender prior to founding Ripple-shared his vision for the
internet of value and how Ripple is working to achieve it.
How have payment demands changed for
consumers and businesses over time?
A: The need for high volume, low value, real time global
payments has never been greater. There are new types
of corporations emerging that are becoming very big very
quickly, and they're everywhere, so we've got to reach
everywhere. They've got to make small value payments,
which is difficult given the way the current cross-border
payments system works.
And then behind that, there is a "second wave" of things
that we can't even predict at this point-like the "internet
of things"-where it's not just devices exchanging data,
but likely devices exchanging value. These are just two
things that are pushing the world into having a more
Those are good dynamics for banks. Banks with new
infrastructure can serve more customers, they can serve
their customers better, they can lower their costs. I think
that's why this is a good time to be looking particularly at this
"internet of value" idea.
What is the "internet of value" and how
does Ripple work to achieve it?
A: Broadly, that is the big thing happening here. "Internet
of value" simply means that we're moving into a world where
value-money, payments, etc.-moves like information
ABA BANKING JOURNAL | NOVEMBER/DECEMBER 2016
moves today because of the internet. We used to live in a
world where data did not move quickly-it was incredibly
expensive to make a phone call between countries, you
couldn't reach people. That's exactly what we have today
in payments. And I think that that's ending because of the
technology breakthrough happened about seven years
ago-starting with bitcoin-which simply meant that you
didn't need a central operator to exchange value.
What do you see as the disruptive impact
of the internet of value? What about
banking will change as a result of this?
What will stay the same?
A: Banks are actually really well-positioned because
they are probably the best organizations in the world at
reconciling the three domains of the internet of value: tech,
compliance and risk. A lot of that compliance and risk is not
going to change, and a lot of the tech is not going to change.
Banks are pretty tech-heavy already, so most of what they
do is not going to change.
What's changing here is real-time settlement and how
liquidity moves around the world. You now can have a
network where value can move to parties you might not have
a direct connection with. And that's a big breakthrough. It
should lower reconciliation costs for banks and it should
make low value payments profitable. It should also allow for
new services we haven't even thought of yet. Once they get
that low-cost structure [in place], this could open up a huge
opportunity for banks and for fintech companies to develop
things that just weren't possible until now.
How is Ripple different from other
A: We're trying to be a payments company that uses
blockchain, rather than a blockchain company that's trying
to find a use case. We're trying to address the time, the cost
and the fail rates of cross-border payments, and also offer
access to all kinds of banks and their customers.
Our belief is that this notion that the whole world is going to
adopt a single distributed ledger is not realistic or possible,
and doesn't really solve the issue. We believe in the trend of
distributed financial technology as a broader movement; our