stellar digital currency

Open, non-profit payment protocol Stellar has partnered with four financial institutions to enable low-cost global money transfers to the Philippines and cross-border payments to and from India, Europe, Kenya, Ghana and Nigeria.

The new partners are: ICICI Bank, India's largest private sector bank by consolidated assets; Coins.ph​, which provides mobile financial services for the underbanked in Southeast Asia; Africa's Flutterwave which connects with the M-Pesa network; and Tempo Money Transfer​, a licensed money transfer service based in Europe.

ICICI Bank​ is launching a pilot programme on Stellar for cross-border payments without traditional wire fees. ICICI is also launching a mobile wallet application with a Stellar backend for its university and office campuses, which they will potentially roll out to their entire customer base.

Coins.ph​ will enable users to send global remittances to anyone in the Philippines using a Stellar wallet or from any institution connected to the Stellar network. For example, all the financial institutions on the Stellar network will be able to send money to the Philippines through Coins.ph, to India through ICICI and from Europe through Tempo.

Flutterwave will use Stellar to support cross-border payments for M-Pesa, a mobile platform for money transfer and financial services. For the 21 million M-Pesa users who are limited to transacting in Kenya, this move will expand their ability to send payments regardless of whether they are based in Kenya, Ghana or Nigeria, said a statement.

Filipino workers around the world sent $26.92 billion back to the Philippines in 2015, making the Philippines the third largest remittance market in the world, according to the World Bank. Until now, people sending money to these countries were limited to traditional remittance services like Western Union or MoneyGram, which charges steep fees.

The Philippines remittance market has been attractive to Bitcoin companies offering low fees, but costs can mount up converting in and out of Bitcoin.

Jed McCaleb, CTO of Stellar.org, said: "The problem with that is the person at either end doesn't want to hold Bitcoin so it takes two exchanges. If you are sending from the US to Philippines, the person in the US essentially is buying Bitcoin, so it's one exchange from dollars to Bitcoin and then it goes from Bitcoin to Filipino pesos on the other end – so that creates a higher spread because you have to have two exchanges. With Stellar you just go directly from dollars to pesos, so it is more efficient and it's faster of course."

McCaleb said the Stellar protocol is solid and stable and that Stellar Development Foundation (SDF) has been working on improving the integrator experience; like a compliance server to do all the necessary AML checks and a federation server to make it user friendly and make integration easy for people.

He also said SDF has been working on integrating the Lightning Network, Bitcoin's incipient high scale payment channel. "So you can do many transactions between people and have it be private and be interoperable with Bitcoin and other networks.

"Stellar is much more scalable than other blockchain technologies, but still there are limits, and something like Lightning can allow Stellar to potentially scale infinitely because it's just between the two parties; they can set up a Lightning channel between them and keep all of that off the main chain making it much more scalable."

India represents fabulous fintech territory, with a huge population and a growing technology infrastructure and culture. McCaleb said ICICI Bank understands blockchain remittance quite well.

"A lot banks around the world are doing blockchain POCs, but once it comes to actually putting it live they don't really have an appetite for it. But I believe that ICICI is one of the first banks – or the first bank – that has done something live."

"There's tons of remittances that go in and out of India, thus cross-border payments are super-important for them. ICICI is about to go live with a Stellar enabled mobile wallet with plans to expand to cross-border use cases after that."

Raj Chowdhury, head of the blockchain initiative, ICICI Bank said: "With blockchain technology we are able to conduct business seamlessly with parties with which we had no prior relationships. Blockchain platforms such as Stellar.org are providing us with an automated technology solution to establish trust without the need for an intermediary.

"This technology is enabling us to conduct business a lot quicker, cheaper with lower error rates and lower vulnerability to cyber threats. It is helping us eradicate the need for post transaction settlements which are cumbersome and expensive. We envision blockchain technology playing a key role in banking in the years ahead."