On June 18 2020, over 40 crypto companies and non-profit organizations, including Brave, Huobi, BitGo, BitPay, Bitstamp, CipherTrace, Dharma, Liquid, and Blockchain.com, joined the Ripple-sponsored Open Payments Coalition project. Its goal is to launch a universal network of instant payments PayID. Its users will be able to conduct international transfers from banks, electronic and cryptocurrency wallets using a single identifier similar to an email address. Potential PayID reach - over 100 million users from around the world. DeCenter figured out how the new global payment platform will be arranged, what opportunities it opens up for users, and what are its chances of becoming popular.
How will Ripple PayID work?
PayID's goal is to make global payments as simple and fast as possible. “ If sending a payment were as seamless as sending an email or text, we would all send more payments quickly and easily around the world ,” said Ripple CEO Ethan Bird.
PayID is a single universal identifier used to send and receive funds through any payment network in any currency, including digital. The identifier consists of a series of letters and numbers and looks like a domain name, where instead of the @ sign $ is used - for example, Satoshi1975 $ wallet.com.
To transfer money to PayID users, an identifier is enough - payment details or a wallet address are not needed. No need to enter bank account numbers, international codes, route numbers, SWIFT identifiers or long crypto-wallet addresses. This is reminiscent of bank transfers by phone number. But, unlike them, PayID should provide cross-border and cryptocurrency transfers, as well as unite wallet users of different payment systems in a single network.
Example of transferring funds to PayID using a payment identifier. Source .
Developers compare PayID technology with email. It doesn’t matter what service you use - the owner of a mailbox in Gmail can send an email to a Yahoo or Yandex user. But when it comes to sending funds over the Internet, things get more complicated. The payment infrastructure still consists of hundreds of isolated networks, weakly and inconveniently connected to each other. Venmo wallet owner cannot directly transfer money to PayPal user.
“Sending a payment should be as simple as using email — no matter where you are, what currency you use, or to whom you want to send it. Everything is very simple. #PayIDTogether , ”said Ripple CEO Brad Garlinghouse to explain the benefits of PayID.
The solution is inspired by the Ripple Interledger protocol , which allows transactions between different registries using a crypto guarantor . Interledger also encourages the use of Xpring, a program to attract business partners to use XRP. So far, PayID is able to send payments in BTC, ETH, XRP and in fiat currencies.
PayID leverages existing web standards and infrastructure, including HTTP and DNS. Each participating company launches its own server, and together they form a peer-to-peer decentralized network without a central governing body. Technically competent users who independently store their cryptocurrencies can connect their own server. However, PayID does not rely on any consensus protocols, which simplifies infrastructure requirements. PayID uses proven and standard security technologies, such as a TLS certificate, and PayID transactions are protected by cryptography and private keys.
Ripple relies heavily on the ease of launching PayID. The project’s website emphasized that “ PayID was created by developers for developers .” Anyone " can deploy a PayID server with just a few commands with their existing web infrastructure, and then integrate it into an application or account system in just a few lines of code ."
PayID can be used by anyone for free: users, any business sending and receiving money, charitable organizations that collect donations. Also, the technology can be used as a digital ID. PayID has an open code - it can be used by both cryptocurrency and any traditional company by integrating the PayID server into its existing infrastructure. Ordinary users only need to provide an email address or phone number tied to their bank account.
The PayID website emphasized that the system complies with international transfer rules, including FATF regulations , the requirements of the US Financial Crimes Unit (FinCEN) and the “travel rule” - the need for platforms to exchange data on senders and payees. The latter turned out to be a difficult technical task for the crypto world. Ripple solved it by implementing the Travel Rule Information Sharing Alliance (TRISA) protocol .
The project website and the press release do not indicate transaction fees. And if, apparently, they will not change during transfers within one system, then it is still unknown how much you will have to pay for a transfer from a bank account to an electronic wallet or an exchange between two cryptocurrencies.
We’ll clarify that the name of the network “PayID” fully repeats the name and concept of the universal payment identifier used in the New Payment Platform Australia (NPP). NPP is a national fast payment infrastructure (an analogue of the Russian Quick Payment System, SBP, from the Central Bank), created under the auspices of the Reserve Bank of Australia and supervising transactions using PayID. A number of media managed to combine NPP with a project from Ripple, but they are not connected in any way.
Why Open Payments Coalition?
To implement PayID as a full-fledged global payment network, Ripple has created a coalition of blockchain and fintech companies Open Payments Coalition. It included 43 companies and non-profit organizations, including BitGo, BitPay, Bitstamp, Blockchain.com, Brave, BTC Markets, CipherTrace, The Giving Block, Huobi, Liquid, Mercy Corps, Ripple, Standard Chartered Ventures, Sygnum and others. It is alleged that their total audience is 100 million people.
As you can see, the coalition boasts several large blockchain projects. Among the parent companies, there are also companies that work only with fiat money. This should simplify the transfer of funds from crypto to fiat and vice versa.
However, there are no large financial companies and banks among PayID participants (the crypto-bank Sygnum and the Asian transnational corporation Standard Chartered Ventures, which is an early investor of Ripple, do not count). Of course, the user of the new system will be able to send them funds through intermediaries, but this is far from the seamlessness and efficiency that Ripple aims for.
Ethan Beard believes that PayID is able to compete with Libra from Facebook and WeChat from AliPay, which are moving towards creating their own private payment networks. In his opinion, this should push major payment industry players - for example, PayPal, Venmo, Tencent, Square, Circle, SnapCash, Dwolla, Paym, TransferWise, CurrencyFair, One97, TransferWise - to join PayID as an alternative to Facebook and AliPay projects. Beard believes that the network will allow participating companies to expand their user base, and business - to gain access to new payment networks and increase the number of customers.
It is also important that PayID should help companies comply with FATF regulations and FinCEN requirements. At the same time, the integration with RippleNet, a payment network for cross-border payments with more than 300 companies, can attract banks to the project .
However, whether traditional financial companies will be interested in joining the project is a big question. So, open source - a clear advantage for blockchain companies - is likely to scare away large payment systems and banks, as it may not meet their standards. In addition, the payment protocol, which works with different platforms, is disadvantageous to the leaders of the payment market - it can entice some users or affect the income from them. Moreover, according to insider information, CoinDesk, PayPal and Venmo are going to add the ability to work with cryptocurrencies to their services. This will make their cooperation with PayID even less necessary than now. And without large companies, PayID is likely to be limited to cryptography.
Will PayID be in demand?
So far, PayID has few advantages compared to even traditional payment systems. Its creators give the opportunity to send funds by one identifier as the main competitive advantage of the new payment system, thanks to which "people will make dozens of transfers per day." But in fact, this only plus of the service does not look too disruptive.
Transferring funds by one number, of course, is convenient, but within the country it is a repetition of the functionality of quick payments - transfers by phone or card number (in countries where such systems exist). Yes, PayID also offers cross-border and cryptocurrency transfers. But the identifier looks like a weak advantage here: for example, instead of entering a long crypto-wallet address, you can use a QR code, and PayPal also allows its users to send funds to each other only by email address, it has its own system for identifying users by internal ID.
The real advantage of PayID is the ability to seamlessly transfer funds between different payment systems and currencies, including between fiat and cryptocurrency accounts. If successful, Ripple hopes that its standard will become popular and will be used by other companies. However, for now, there seems to be little chance - third-party firms are simply not interested in this. And the big question is whether such a close relationship with Ripple will benefit from the solution.
Alexander Zaitsev, founder of the RAISON.ai financial platform, believes that PayID is an interesting product, but it has little chance of success. “ This is not the first attempt to create a single identifier for transferring payments - I remember at least 10 companies that tried to do this. It was not possible to introduce such a service in the framework of a decentralized blockchain, because market participants could not agree, and without consensus at least 80% of the players in a single identifier does not make sense, ” he said.
The expert notes that PayID will compete with popular payment solutions of the markets in which it will be presented. In the European Union, these are SEPA and Instant Payments, in China - WeChat and Alipay, in the USA - PayPal and so on. This is too much competition for such an initiative. Alexander Zaitsev is skeptical about the chances of PayID becoming a global payment service: “ For this to happen, you need consensus among major players, and they are unlikely to want to use“ open source ”solutions for international payment transfers ."
One way or another, initiatives like PayID are part of the future of international transactions. This is an important step in building a more convenient, fast and transparent payment infrastructure that meets the modern realities of the global world.