Banking & Payments
Ripple-backed PayID aims to make payments just email
What will it take to drag the entire payments world into an Internet-like experience?
PayID is a new open-source standard for transmitting money that uses the nomenclature of email addresses.
Its biggest backer among a coalition of supporting companies is Ripple Labs, the U.S. fintech known for its building payments infrastructure meant to displace SWIFT and other legacy messaging protocols.
Helping push PayID represents Ripple’s expansion from working in the plumbing of international payments to engaging with the actual users: the consumers and businesses that want to move money, says Navin Gupta, Ripple’s managing director for South Asia, the Middle East and North Africa, based in the United Arab Emirates.
“In the information world, you can send an email to my email address. Your server sends it to Ripple’s server, which knows to route it to the correct inbox. If we didn’t have this address system, you’d need to know my IP [that is, the long string of digits used by the Internet Protocol].”
IPs have instead been abstracted into simple alphanumeric addresses that humans intuitively understand, like email@example.com. But to wire money overseas, you need to input details including names, account numbers, SWIFT codes, and bank and branch codes.
Companies enabling use of PayID would require users to simply use addresses like an email, only using the dollar symbol instead of the at symbol.
“If I had an account at HSBC,” Gupta said, “my account would be navin$hsbc.com, HSBC would know it’s my account, and it would be simple for people to send me money.”
The same goes for businesses. “Companies handling large volumes of payables and receivables would benefit from this even more,” Gupta said, adding that crypto wallets – whose passwords tend to be complex – could use the same abstraction, helping mainstream digital assets.
The reason Ripple and its partners think PayID will work, beyond this simplicity, is that it is open source and therefore meant to be interoperable: it’s a standard, akin to ISO20022 (for SWIFT messages), rather than a commercial enterprise.
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It should not matter if you use AliPay or PayPal. With an open standard like PayID, moving money should be the same as sending an email from your gmail account to someone receiving it with their baidu account.
“Email used to be something you could only send among users of AOL,” Gupta said. “Eventually consumers won and this became interoperable.”
Game changer or pipe dream?
A recent CLSA report authored by group research head Shaun Cochran commented favorably on PayID:
“In the payments world, we believe the rise of demand for digital and micro transactions combined with the prevalence of biometric (for authentication) smart devices and cross currency blockchain protocols (to disintermediate SWIFT) create the potential to break the banking monopoly on global card-based payments…
…The potential here to facilitate automated seamless processes for consumers and users is substantial and would not be tied to legacy banking systems. The challenge for the banks is they currently make material fees from their legacy processes and face the classic innovators dilemma.”
DigFin asked Gupta to compare PayID to some other projects: VisaB2B, Libra, and China’s DCEP (digital yuan). (SWIFT is also working to push interoperability from a different starting point.)
With regard to VisaB2B and card payment networks generally, he says PayID is complimentary. “We’re struggling with the same thing. I want to use my Visa card to pay someone abroad. It involves a lot of typing…we want to keep our interoperability with banks and card companies.”
Libra could do the same thing, at least within the Facebook-controlled networks used by nearly 2 billion people. Gupta said, “We’re on the ground live. PayID is there for companies to download. It’s up to you to determine if it delivers value. Our focus is just interoperability and how networks cross over to each other.”
DCEP? “I don’t know China’s plans but institutions can use PayID the way they want, be it domestically or cross-border.”
Are capital controls going to be an issue? Gupta says no because PayID is open source, and compliant with the Financial Action Taskforce (FATF), a body of international regulators focused on curbing money laundering and terrorist financing. “Central banks are supportive of open-source standards.”
And how does something like this get rolled out? PayID has lots of partners besides Ripple, such as Asian giants like GoPay (the payments arm of Gojek) but they are all fintech and crypto firms (except for Standard Chartered Ventures).
Ripple is embedding PayID in RippleNet, its bank remittance network. But its member banks are still modest compared to traditional networks such as SWIFT for correspondent banking or the fragmented world of remittances.
Will banks embrace this, or will they double down on their legacy processes?
The presence of many crypto companies among the founders of PayID suggest it could be in this world where email nomenclature really takes off. (Ripple is also a supporter of XRP, an open-sourced digital token it uses as a payments mechanism.) According to PayID’s initial announcement, founding members of the Open Payments Coalition include:
BitBNS, BitGo, BitPay, Bitrue, Bitso, Bitstamp, Blockchain.com, Brave, BRD, BTC Markets, CARE, CipherTrace, Coil, CoinField, Coinme, Coinone, Coins.ph, Crypto.com, DeeMoney, Dharma, Dwolla, FlashFX, Flutterwave, Forte, GateHub, GiveDirectly, The Giving Block, globaliD, GoPay, Huobi, Independent Reserve, Liquid, Mercury FX, Mercy Corps, Modusbox, PolySign, Standard Chartered Ventures, Sygnum, Tangem, TRISA, Unstoppable Domains, Uphold, Wyre, XUMM.