- Paris-based European cross border payments service Tempo chooses Stellar over Ripple
- Stellar’s decentralised protocol a more “natural fit” than Ripple’s centralised alternative
- Blockchain tech promises faster, more reliable and more secure transaction processing than SWIFT
It’s an open secret that leading EU-licensed cross border payments fintech company Tempo Money Transfer has been experimenting with blockchain technology and cryptocurrencies; what hasn’t been divulged is which of the two front-runners in the crypto-fintech partnership, Ripple or Stellar, would emerge victorious. Until now, that is: the outcome has just been announced by Tempo - and the winner is ... Stellar.
The choice is a crucial one. For businesses like Tempo that specialise in remittance services, making the right decision for a crypto-fintech pairing has major implications for customer uptake, growth and profit. More people have become aware of the growth of cryptocurrencies as a means of making international payments as cryptocurrency-based fintechs have gained more traction in a market formerly dominated by fiat-based remittance services.
However, it’s fair to acknowledge that of all the cryptocurrencies out there, two have dominated: Ripple and Stellar. Both offer solutions to the same problem, but they do so by using two virtually diametrically opposed methods. Ripple clearly has a preference for centralised protocols, while Stellar favours decentralised alternatives.
In a new interview for the Blockchain Podcast #66 of Finance Magnates, Tempo’s Chief Technology Officer [CTO] Anthony Barker, talked about the benefits for money transfer services of using blockchains and explained why the company had settled on Stellar rather than Ripple for making cross border payments.
Tempo had already partnered with Stellar to explore ways of reducing costs, increasing transaction speed and achieving robust reliability. Barker explained that Tempo’s original emphasis had been on remittance and cross border payments. However, since then, the company had placed greater emphasis on small value payments, “the stuff that banks don’t handle well”.
Banks and non-banking financial companies like Western Union were responsible for around 53% and 33% respectively of international foreign exchange transactions. As they both rely on the SWIFT settlement system, he said, they were faced with all its disadvantages: “It’s really expensive, it’s a nightmare [with correspondent banks]; money gets locked up and there’s no idea where it is or where it’s been blocked.”
That’s why smaller, more innovative upstarts like Tempo decided to migrate to blockchain tech, in search of ways of making smaller payments less expensive and less time-consuming. Banks tend to find payments under $10,000 commercially non-viable.
For Barker and his colleagues at Tempo, Stellar’s philosophy and open design aligned well with the remittance firm’s own ethos. He said: “Stellar was sort of a natural fit for us … My gut reaction was that [Ripple] is not so good for community building … [It’s] much more like a Visa/Mastercard… I have a strong belief that open systems win in the long run.”
He went on to explain that he and his colleagues had worked closed with Stellar’s CTO Jed McCaleb and his developers, adding compliance to ensure its new blockchain-based payment solution was seamlessly integrated into Stellar as a regular 2nd-layer protocol. That enables them to know how to send first name, last name and date of birth ultra-securely and ultra-swiftly.
Tempo sees cryptos as having major advantages over fiat-based systems, Barker explained: a $1 remittance, for example, can be reconciled as rapidly and efficiently using cryptos as a $1,000,000, 000 remittance.
If you’d like to read more about Tempo, you might enjoy our recent article here.
