Liquidity and FX rates

[OctagonFS]

Hi guys.

 

I'm new to the crypto scene but I have been following Ripple and XRP quite closely as it seems to have the best ingredients needed for a truly global payment system.

 

So I'm based in South Africa and I'm building a payment system that will rival Western Union, MoneyGram and the banks in general on the price front for cross border payments. I'm still going through the arduous task of getting licensing from the Reserve Bank here as they practically regulate entities like gateways as banks (almost). So please help me out guys I've read some fascinating insghts on here and you guys seem to know your ****.

 

The main thing I need clarity on, if I have a gateway in two countries, say South Africa and Mozambique, how can I access liquidity on the ripple network? 

 

Are there market makers active in African countries? 

 

If I'm the only one providing the service of remittance to one country, how can I leverage XRP to save money and give low prices to my clients? 

 

How can I make a cross currency trade profitable if it's just my company involved as a payout location at both ends?

 

Any feedback would be absolutely appreciated.

 

Regards.

[will4star]

17 minutes ago, OctagonFS said:

 

Hi guys.

 

I'm new to the crypto scene but I have been following Ripple and XRP quite closely as it seems to have the best ingredients needed for a truly global payment system.

 

So I'm based in South Africa and I'm building a payment system that will rival Western Union, MoneyGram and the banks in general on the price front for cross border payments. I'm still going through the arduous task of getting licensing from the Reserve Bank here as they practically regulate entities like gateways as banks (almost). So please help me out guys I've read some fascinating insghts on here and you guys seem to know your ****.

 

The main thing I need clarity on, if I have a gateway in two countries, say South Africa and Mozambique, how can I access liquidity on the ripple network? 

 

Are there market makers active in African countries? 

 

If I'm the only one providing the service of remittance to one country, how can I leverage XRP to save money and give low prices to my clients? 

 

How can I make a cross currency trade profitable if it's just my company involved as a payout location at both ends?

 

Any feedback would be absolutely appreciated.

 

Regards.

 

These are some great questions. For technical details your best bet would be to ask b@JoelKatzor @nikb. I wouldnt know how to actually connect a payment system to a marlet maker, though im sure it can't he too hard as that is what a Maket Makers is for, however I'm doubtful there are ZAR-XRP or XRP-MZN gateways at this time. There could be soon, though, especially if  it is a very inefficient corridor.

 

[OctagonFS]

These are some great questions. For technical details your best bet would be to ask b[mention=30]JoelKatz[/mention]or [mention=20]nikb[/mention]. I wouldnt know how to actually connect a payment system to a marlet maker, though im sure it can't he too hard as that is what a Maket Makers is for, however I'm doubtful there are ZAR-XRP or XRP-MZN gateways at this time. There could be soon, though, especially if  it is a very inefficient corridor.

 

I want to be the first one pairing African currencies and enjoy a sweet monopoly for a while until everyone wakes up. I spoke to Joel Katz on Twitter, contacted Ripple and nearly all cryptocurrency accounts on Twitter and Facebook and they haven't been too helpful. But this region desperately needs the service and it can be something revolutionary. Could make the right waves that get XRP really noticed AND get the price up and liquidity in. People are really underestimating this part of the world.

 

 

 

 

 

[Hodor]

47 minutes ago, OctagonFS said:

If I'm the only one providing the service of remittance to one country, how can I leverage XRP to save money and give low prices to my clients? 

I'm confused about one thing - how does the remittance part work on your proposed platform?  i.e., how does a user get value to you for the transfer? 

It may seem like a dumb question, but I think you might want to partner with banks....or.... another technology that can then partner with banks.  I don't know if it fits, but you can review and be the judge: another thread was discussing the incredible dominance of one mobile payment platform in other regions of Africa: M-PESA

https://centricdigital.com/blog/digital-transformation/how-emerging-markets-are-tapping-into-consumer-banking-technologies/

Quote

Launched in 2007 by Safaricom (the country’s mobile network operator), the M-PESA platform enables consumers to transfer cash directly through their mobile phones. Acclaimed by The Economist as the most effective system of its kind in the world, M-PESA is now used by two-thirds of the adult population of Kenya (over 17 million people) and by 2012, 31 percent of the country’s GDP was flowing across the M-PESA networks.  

 

[OctagonFS]

 

Yes we would be open to partnering with banks but the problem is, banks might have their own way of doing things. They might want to see you do good, but not TOO good.

Users would get money into the system via various pay-in and payout locations quite similar to a bureau de change. They'll load up their wallets to pay others at their own time or directly send the money to anyone they so please in the areas where we have presence. This is why the South African Reserve Bank regulates these businesses like banks, when you accept deposits, you get treated like a bank, but with limited authority. Preferably, I would like to run it as a separate entity from a bank simply because we will be dealing with crypto and would like to have self determination, but I would not refuse a fair partnership with them.

The other thing is, should we establish a gateway, as I understand it, we would automatically ahead of services like M pesa. We could even plug them into our network due to the interoperability of the system. And we could charge them a small fee to connect with anyone in OUR network.

Seems like the only way is to have financial backing and take responsibility of payouts in both ends. XRP or the blockchain itself would be like just another existing system just maybe more efficient and open. Just until the big banks here accept XRP.

[will4star]

@OctagonFS Have you tried contacting Ripple business department directly?

via: https://ripple.com/network/liquidity-providers/

You may have more luck. 
P.S. would be interested to see how your project progresses!

Edited May 26, 2017 by will4star

[kanaas]

Maybe contact Flash-FX? They do something similar in AUS and they may wanna work with you? The already partner with Gatehub


Verzonden vanaf mijn iPhone met Tapatalk

Edited May 26, 2017 by kanaas

[Eik]

I am not an expert on this, but I guess a general gateway use case would then be something like:

1. start a business, say 'YourGateway'
2. In both countries, make a reliable 'pay-in' and 'pay-out' channel for the local currency.
3. For each ZAR you get in, issue an IOU called ZAR.YourGateway on RCL. For each MZN you get in, issue MZN.YourGateway to the user.
4. Both can be redeemed 1:1 for the fiat you have stored.

Users then can chose to (create) buy and sell (orders) for XRP. Other users can then exchange ZAR to MZN and vice versa (via the XRP orders).

You can increase liquidity by creating yourself the ZAR/MZN orders, reducing your exposure to XRP volatility.

[kanaas]

11 minutes ago, Eik said:

I am not an expert on this, but I guess a general gateway use case would then be something like:

1. start a business, say 'YourGateway'
2. In both countries, make a reliable 'pay-in' and 'pay-out' channel for the local currency.
3. For each ZAR you get in, issue an IOU called ZAR.YourGateway on RCL. For each MZN you get in, issue MZN.YourGateway to the user.
4. Both can be redeemed 1:1 for the fiat you have stored.

Users then can chose to (create) buy and sell (orders) for XRP. Other users can then exchange ZAR to MZN and vice versa (via the XRP orders).

You can increase liquidity by creating yourself the ZAR/MZN orders, reducing your exposure to XRP volatility.

Sounds like a good plan, but as a gateway you got to invest a certain amount in ZAR & MZN to back your own orders. One can of course lend them on the bank, but than if the amount ZAR to MZN isn't well balanced one can lose (or gain) on the fluctuations in rates between those currencies. But overall I really think this might work very well and should be very competitive compared to those like WU, Moneygram and even Transferwise....

Edited May 26, 2017 by kanaas

[Eik]

13 minutes ago, kanaas said:

Sounds like a good plan, but as a gateway you got to invest a certain amount in ZAR & MZN to back your own orders. One can of course lend them on the bank, but than if the amount ZAR to MZN isn't well balanced one can lose (or gain) on the fluctuations in rates between those currencies. But overall I really think this might work very well and should be very competitive compared to those like WU, Moneygram and even Transferwise....

This model indeed only works if the remittance is fairly balanced, i.e. ZAR->MZN is equally used as MZN->ZAR.

Or if you can balance any deficit herein yourself.

Edited May 26, 2017 by Eik

[tulo]

12 hours ago, OctagonFS said:

So I'm based in South Africa and I'm building a payment system that will rival Western Union, MoneyGram and the banks in general

I didn't get which kind of service you want to offer. Western Union and MoneyGram offer a very specific service, oriented to people that doesn't have bank accounts and that would like to send/receive physical money (people go at the counter and pay with cash; the receiver in the other country receive cash in another counter). 

But you are saying you want to rival also banks! It's a bit too general and I think you should reflect and explain more the type of service. Because it might require extra infrastructure, market makers, or other thing that Ripple itself cannot solve.

About the liquidity: RCL is an open network, so anyone could become a market maker, but there are not active market makers for ZAR and MZN (because there are no public gateways). But you need to provide good prices and rates to your clients, so if you could back the offers initially and then adopt a transferwise model (where clients itself are the market makers) it can be a nice solution. In this case you could use Ripple to have already done all the infrastructure and maybe external liquidity via XRP, but also a centralized approach as transferwise could have its advantages.

[OctagonFS]

I didn't get which kind of service you want to offer. Western Union and MoneyGram offer a very specific service, oriented to people that doesn't have bank accounts and that would like to send/receive physical money (people go at the counter and pay with cash; the receiver in the other country receive cash in another counter). 
But you are saying you want to rival also banks! It's a bit too general and I think you should reflect and explain more the type of service. Because it might require extra infrastructure, market makers, or other thing that Ripple itself cannot solve.
About the liquidity: RCL is an open network, so anyone could become a market maker, but there are not active market makers for ZAR and MZN (because there are no public gateways). But you need to provide good prices and rates to your clients, so if you could back the offers initially and then adopt a transferwise model (where clients itself are the market makers) it can be a nice solution. In this case you could use Ripple to have already done all the infrastructure and maybe external liquidity via XRP, but also a centralized approach as transferwise could have its advantages.

That's an absolutely fascinating insight on how to approach it. Let me simplify it.

I want to establish a Western Union like model where the people sending remittances, physical cash, would be able to do so for very low cost. Secondarily, a wallet that connects people to my to their wallets that's mainly for domestic use. My plan is to establish payout points/ gateways ejdre people can withdraw and send cash from, in every major city in the SADC region. The back end of my system being built in Ripple would be able to connect these locations with the network and be able to receive money from anyone connected to the network. This will help realise my mission of cheap inter-Africa trade. I know it's a lot but I promise it's quite simple.

Just think of a Western Union like model built on Ripple. With a desktop/phone based wallet for more advanced trades. I need the solution to my FX liquidity problem.

[tulo]

1 hour ago, OctagonFS said:

That's an absolutely fascinating insight on how to approach it. Let me simplify it.

I want to establish a Western Union like model where the people sending remittances, physical cash, would be able to do so for very low cost. Secondarily, a wallet that connects people to my to their wallets that's mainly for domestic use. My plan is to establish payout points/ gateways ejdre people can withdraw and send cash from, in every major city in the SADC region. The back end of my system being built in Ripple would be able to connect these locations with the network and be able to receive money from anyone connected to the network. This will help realise my mission of cheap inter-Africa trade. I know it's a lot but I promise it's quite simple.

Just think of a Western Union like model built on Ripple. With a desktop/phone based wallet for more advanced trades. I need the solution to my FX liquidity problem.

Yeah, that can work out...I imagine little ATM around cities where people can deposit and take money. And a phone app to manage stuff (nowadays everybody has a phone). If not an app, with sms.

I think, other than the technical details, the problems are regulation and liquidity. I think a transferwise model could solve in part the liquidity problem.

Also I see this approach very scalable, let's say another company wants to offer USD, they could just use the same ATM and APP and software and bam! the USD conversion is possible from and to all other currencies in the network.

PS: a few words on the transferwise model that I love (and I was already thinking about sort of western union on ripple using this approach): people "depositing" money can decide if they want to pay immediately, i.e. the act as market taker using offers in the orderbook (maybe they want a faster payment instead of saving more money) or they can decide the rate at which the payment occurs, i.e. they place an offer in the book acting as market maker and producing liquidity. This model is very nice because the customers itself act as liquidity provider (but you can have also external ones), and you can think about having lower fees for market maker to incentivize the liquidity.

Of course using Ripple external market maker can take part into providing liquidity (if the regulations allow it).

PPS: I'd put my market making bots to provide some liquidity to this project

Edited May 26, 2017 by tulo

[OctagonFS]

Yeah, that can work out...I imagine little ATM around cities where people can deposit and take money. And a phone app to manage stuff (nowadays everybody has a phone). If not an app, with sms.
I think, other than the technical details, the problems are regulation and liquidity. I think a transferwise model could solve in part the liquidity problem.
Also I see this approach very scalable, let's say another company wants to offer USD, they could just use the same ATM and APP and software and bam! the USD conversion is possible from and to all other currencies in the network.
PS: a few words on the transferwise model that I love (and I was already thinking about sort of western union on ripple using this approach): people "depositing" money can decide if they want to pay immediately, i.e. the act as market taker using offers in the orderbook (maybe they want a faster payment instead of saving more money) or they can decide the rate at which the payment occurs, i.e. they place an offer in the book acting as market maker and producing liquidity. This model is very nice because the customers itself act as liquidity provider (but you can have also external ones), and you can think about having lower fees for market maker to incentivize the liquidity.
Of course using Ripple external market maker can take part into providing liquidity (if the regulations allow it).
PPS: I'd put my market making bots to provide some liquidity to this project [emoji6]

Tulo you have given me more in two comments than most people have been able to in months of conversation. This is why I'm glad I came here.

Now, I'm going to study your comment more closely match it up against the regulations and see what's possible. But I think it's gonna work! Becasue regulators (financial intelligence center) don't really regulate HOW you run your business, just whether you comply with law and those will be built in the system so we never get into trouble.

Now let's say I do get outside providers of liquidity, how can I work a few structure with them that doesn't get anywhere near the rates banks charge because remember we're trying lower the transaction cost so much traditional institutions must not get near it.

I really appreciate your feedback. My mind is starting to open up to possibilities now. [emoji2]

[tulo]

5 minutes ago, OctagonFS said:

Now let's say I do get outside providers of liquidity, how can I work a few structure with them that doesn't get anywhere near the rates banks charge because remember we're trying lower the transaction cost so much traditional institutions must not get near it.

It depends on your business model, which fees you want to charge to the customers and which fees the market makers have to pay. But let's say MM doesn't have to pay any fee for moving the IOUs, you could expect (but it highly depends on the volumes and the volatility of the currencies you offer) a <1% spread, plus some slippage if the liquidity is not enough (but you can limit the transaction's max amount at the beginning). And to that you can add your fees (percentage or fixed amount?). But right now western union is taking up to 15% if I recall correctly. It's probably easy to go lower than that. Moreover the payment is real-time.

I really look forward to this project, because it is something I always wanted to see developed...