One of China's biggest payment services providers is teaming up with blockchain developer Ripple to push forward cross-border payments, as e-commerce in the country spreads further overseas.
LianLian Pay is one of the biggest players in China's third-party payments sector, with 150 million clients using its services, including Amazon, Alibaba and eBay.
According to the Chinese Cross-Border E-commerce Index, 2018 will see imports and exports through e-commerce worth as much as 8.8 trillion yuan (1.32 trillion U.S. dollars).
The expansion of e-commerce and online trade between China and the rest of the world means merchants and consumers are looking for cross-border transactions to be processed as quickly and securely as possible – and this is where blockchain can come into play.
You might have heard of Ripple in reports on Bitcoin, Ethereum, Litecoin and other cryptocurrencies. In fact, it was by far the fastest growing cryptocurrency in 2017, increasing in value by 35,000 percent. Its market cap at the end of last year hit 91.8 billion U.S. dollars, second only to Bitcoin.
While the price of the Ripple coin (also known as XRP) fluctuates in the same way as Bitcoin, the innovative blockchain technology behind it has seen deals struck with more than 100 financial institutions, including MoneyGram, Credit Agricole and TransferGo.
Ripple's focus on using blockchain technology to rapidly process inter-bank payments and cross-border transactions not only saves time but eliminates a significant amount of fees and losses due to currency exchange.
XRP may now be seen as another investment vehicle like Bitcoin, it was originally designed to facilitate transactions on Ripple's xRapid network.
While Mexican payment provider Cuallix and US transfer company MoneyGram have confirmed they will adopt xRapid and use XRP to carry out transactions, the majority of Ripple's partners – now including LianLian Pay – work with another Ripple service called xCurrent.
xCurrent provides end-to-end tracking between banks and financial institutions, rapidly speeding up transactions no matter their location.
Blockchain technology means data can be pre-validated before a transaction is confirmed, with xCurrent communicating between banks and processing the entire payment procedure in just seconds.
For LianLian Pay, working with Ripple will see the payment provider gain an advantage over rivals by rapidly speeding up the time it takes to process payments.
Meanwhile, e-commerce giants like Alibaba could be persuaded to consider blockchain as their cross-border business continues to boom.
According to Caixin, Alibaba's AliPay and TenPay – the payment services provider operating under Tencent – were recently fined 600,000 yuan (95,800 US dollars) for breaking rules on cross-border transaction services.
Another Chinese payment company, Globebill, has had its cross-border license revoked by authorities for similar violations, which include failing to properly verify the identifications of parties involved in transactions, and not providing required information concerning overseas payments.
Because blockchain works through an unalterable ledger that can be consulted publicly at any time, authorities would be able to use it to verify all data related to a transaction, avoiding any chance that a service provider like AliPay or TenPay would withhold or alter data.