This valuation would be even too high to me if they for example provided service to 30% of the banks in the world.
At this moment based on some statements that's super crazy. Maybe in the future it will be different but this is a valuation of a high end blue chip company not of some company with potential.
So banks are valued by the number of customers that they have and the amount of deposits that they hold. Ripple would be valued by taking a portion of the value of all transactions being processed on a daily basis. So the effect is that they receive a higher valuation because they're dealing with significantly compounded amounts of value on a daily basis.
For Example: Bank of China is valued at $150 Billion USD. Their customers transact on a normal business day with an average of $500 Million USD (probably a lower number than actual). Now, say that Ripple is facilitating these transactions at a fee of 0.001 (0.1%) per transaction. That totals to $500,000 USD per day in fees alone. There are 52 weeks in a year, and 5 business days per week, less let's say 10 holidays, for a total of 250 business days. This conservative estimate example ends up at $125 Billion USD in 1 year revenue. For 1 Bank.
So that's how the valuation comes out at such a large number.
In fact banks are valued to the profits they make. Transactions itself of money are in fact a cost for them if they dont charge it to the customer. The real value in it for them is making it last a few days until its on their customers account. In those days they can play with the money
But again apart from all of that. They are doing zero transactions today for banks.
I completely agree. Transaction costs are free for bank customers (mostly), while those fees are being paid by the bank. However, banks are "loaning" money to each other at such ridiculously cheap rates (compared to what a consumer might see), and earning ridiculous amounts of money from that because the volume that they're loaning [which I'd prefer to say that they're "floating"] on a daily basis is absurd (which is where some of their value comes from -- and why their deposits are so important; collateral).
Anyway, Ripple is doing zero transactions today for banks. And I don't even know if they have contracts with any banks yet? But they have the infrastructure built, which is the hard part. If you build it, they will come???
To be honest I'm afraid that a blockchain is a very nice invention that is not really needed.
But maybe paradigm will change in the real world creating a super use case for it.
Like always time will tell :) !