Ripple, Arf Partner to Address Cross-Border Payment Funding Gaps

Ripple and Arf Target Short-Term Funding in Payments

A disconnect exists where payments can move across blockchains in seconds, yet the companies processing those payments may remain short on cash for days. Ripple’s new agreement with Arf addresses this mismatch, utilizing RLUSD to supply working capital to licensed payment businesses.

Arf announced RLUSD settlement financing on the XRP Ledger on October 22nd. This lending is specifically designed to cover the short time lag while cross-border payments are settling. A future move to native XRPL lending is planned, but is contingent on amendments to the protocol.

Bridging the Payment Gap

The product provides financing to cover the period between initiating a payment and receiving the corresponding settlement – typically repaid within one to five days. Arf reports $10 billion in annual settlement activity, representing its existing business volume, and is not the size of a new RLUSD loan pool or a commitment to purchase XRP.

The core issue is that faster payment instructions don’t automatically supply the necessary funds. Temporary financing can bridge this gap, provided lenders can assess borrower creditworthiness and repayment timing. Loan underwriting remains crucial even on a public ledger, as the blockchain records transfers but cannot guarantee a borrower’s financial stability.

Distinguishing Credit from Network Demand

Arf’s plan separates direct financing from a later phase utilizing native vault and lending capabilities on the XRPL, which requires validator approval for protocol amendments. It’s important to differentiate between the loan asset (RLUSD) and the network asset (XRP). Loan amounts reflect credit extended, while transaction fees and account reserves represent different uses of the ledger. A substantial loan can be executed with a small number of transactions and shouldn’t be equated with equivalent demand for XRP.

Source: NewsBTC