Financial innovation company R3 and twelve of its consortium member banks have trialed Ripple’s distributed financial technology and the potential for its digital asset to scale liquidity and reduce the costs and inefficiencies of interbank cross-border payments, the company said Thursday.
The trial demonstrated that the Ripple network could enable banks to make markets for fiat currencies using XRP and then complete authenticated payments without multiple nostro accounts, said Ripple.
R3 member banks involved in the trial include Barclays, BMO Financial Group, CIBC, Intesa Sanpaolo, Macquarie Group, National Australia Bank (NAB), Natixis, Nordea, Royal Bank of Canada (RBC), Santander, Scotiabank, and Westpac Banking Corporation.
The trial was carried out over the Ripple network in R3’s Lab and Research Centre. Banks traditionally provision liquidity for cross-border payments by holding various currencies in local bank accounts around the world, known as nostro accounts. The practice of holding various currencies across many accounts is costly because banks have to fund those accounts, trapping capital. The emergence of digital assets offers an alternative to this process.
“The tradition of holding numerous currencies across multiple accounts in different countries is costly and inefficient. This is a legacy issue from a time when the technology did not exist to offer a viable alternative, however digital assets and distributed ledgers can now enable real-time exchange of currencies between parties anywhere in the world without the need for a third party intermediary. This prototype paves the way for a major overhaul of how banks process and settle cross border payments,” said “David Rutter, CEO of R3 in a prepared statement.