Ripple shares how RippleNet offers global liquidity arrangement in competition to Nostro accounts that allows banks and financial institutions to focus on speed and cost by using XRP and its inherent benefits.
An insight into RippleNet solving liquidity issues
This time Ripple is sharing insights about RippleNet and how it solves the global liquidity issue. The mainstream provider of liquidity “Nostro accounts are both the backbone and the bane of international banking,” starts Ripple.
Without Nostro accounts, international payments will be slowed down considerably as it holds local market currencies on each side of a transaction. However, these accounts tie up hundreds of millions of dollars creating capital inefficiency, adding costs, and increasing the risks.
Liquidity is a pain point that Ripple solves for the banks and financial providers. This is where the global payments network, RippleNet comes into the picture as it supports three types of liquidity arrangements, shared by Ripple in its post,
Traditional bank-to-bank fiat relationships that can be optimized for high volume transaction corridors and using existing bank-to-bank relationships and accounts.
Third party fiat relationships to handle the medium and lesser volume transaction corridors of banks.
The digital asset XRP that can be used by financial institutions for its inherent benefits of speed, scalability, and low cost to expand reach into exotic or lower volume corridors without holding new or additional Nostro accounts.
Financial institutions can also link together multiple liquidity arraignments within the same transaction. Here, XRP helps them be “more efficient with their overall capital” by reducing real-time settlement, loser costs, and funding fewer Nostro accounts.
It further illustrated how the use of XRP in the pilot of US to Mexico remittance corridor “demonstrated savings of 40-70% compared to traditional costs. At the same time, it helped lower settlement times from two to three days to just over two minutes.”
In order to reach the ultimate goal that is the Internet of Value, RippleNet solves the global liquidity needs by allowing banks and providers to focus on the cost and speed of international transactions “as an end customer benefit.”
RippleNet is gaining a lot of attention from Ripple customers which is also going to take the center stage at the Swift’s Sibos 2018 event that is being held from 22 to 25 October.