The Nilson Report

THE CURRENT ISSUE: Issue 1055 | Jan 2015

Today's Download: The Current Issue

Companies featured in The Current Issue include:

Headlines from The Current Issue

Transactions Worldwide - Projected Through 2023

Cignifi Alternative Credit Scores

Dynamics Raises $70 Million in New Funding

Contactless Payments at Smartphones

Ripple Protocol for Financial Transactions

CellPoint Mobile’s Merchant Wallet

Iris Analytics and Cartes Bancaires

Investments & Acquisitions - December 2014

Verifone Mobile POS Terminal

Worldpay Acquires SecureNet

Yapstone Gateway and Online Processing

Commerce Bank’s Toggle Features

Charts in this Issue

Purchase Transactions Worldwide 2013 vs. 2023

Market Shares of Purchase Transactions Worldwide

Investments & Acquisitions - December 2014

Investments & Acquisitions - December 2014

The 47 mergers, acquisitions, and corporate financing deals that occurred in December 2014 are listed on page 11.

1. Adyen - Netherlands
Buyer/Investor: Series B
2. CorFire - U.S.
Buyer/Investor: Mozido
3. MBNA - U.K.
Buyer/Investor Virgin Money
4. Simply Tapp - U.S.
Buyer/Investor: Series B

Full access to the Investments & Acquisitions - December 2014 is available when you subscribe to The Nilson Report.



Like HTTP (Hypertext Transfer Protocol) for building and sharing websites and SMTP (Simple Mail Transfer Protocol) for sending messages on the Internet, RTXP (Ripple Transaction Protocol), which was created by Ripple Labs, is free, open source software that standardizes rules and messages. RTXP is designed for trading and settlement of interbank payments over distributed networks. Ripple Labs calls RTXP email for money.

Existing interbank payment systems, money transfer companies, card networks, Earthport, clearinghouses, and exchanges are centrally designed, and provide messaging logic, business rules, dispute resolution, and risk management for participants. Ripple is not a payment system. Instead, it can be used to upgrade the movement of funds within any existing payment system’s settlement function or can be used in the creation of new competitors to legacy systems.

The aim is to reduce the marginal processing costs of financial transactions at the settlement level between businesses and consumers and between businesses and other businesses, particularly cross-border payments. Ripple can also facilitate currency exchange if transactions require that function. 

RTXP-based accounting can be fully settled in seconds, allowing recipients instant access to funds. Currency exchange, if included, occurs at no extra charge. Banks operate Ripple software on their local servers to create a shared public database of account balances and offers to trade currencies. 

All network participants can view the ledger. Changes to the ledger are agreed to by the network participants. Ripple Labs calls this process consensus. The global account balancing within the ledger is reconciled within seconds through decentralized transaction settlement created by Ripple Labs’ engineers.

Ripple users can hold balances in any currency or commodity, while sending payment instructions in another currency or commodity. The currency exchange is handled by entities Ripple Labs calls market makers, who advertise their bids and offers in order books and broadcast to the protocol the rates at which they will do business. Payment requests are routed to the best available rates using algorithms created by Ripple. Neither the sender nor recipient in a Ripple transaction needs to have a relationship with the market maker handling the currency conversion portion of the accounting. 

Ripple Network transactions have counterparty risk in the same way legacy system transactions do. All instruments are claims against the issuer. What is novel about Ripple is that transactions are processed simultaneously, not sequentially. Ripple changes all accounts in a transaction at the same moment. There is no possibility that party A pays party B, but party B fails to pay party A. 

Fiat money, the legal tender of any nation, enters the Ripple Network at a gateway, which is either a financial institution or a business such as a money transfer firm. Gateway firms redeem balances on the Ripple Network, converting Ripple currency back to fiat currency.

Ripple Labs, which is venture funded by Google Ventures, Andreessen Horowitz, IDG Capital Partners, and other investors, does not act as the central operator. Ripple Labs earns revenue from professional services delivered to network operators such as Earthport. And Ripple Labs also earns revenue from building software that connects RTXP to legacy systems. Clients integrate Ripple accounting into their payment systems. 

Patrick Griffin is Head of Business Development at Ripple Labs, Inc. in San Francisco, California, 

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