Ripple has brought on two small US banks- CBW Bank of Topeka, Kansas and Cross River Bank of Teaneck, NJ- to use its protocol for interbank money transfers.
Their adoption will reportedly reduce the time for such transfers from days to seconds. It will also cut costs associated with having to go through large, national institutions.
The protocol aims to essentially replace the multi-step process of transaction execution, confirmation, clearing and settlement.
Patrick Griffin, Ripple Lab’s executive vice-president of business development, told Wall street Journal in an interview:
“This is the first viable alternative to correspondent banking in about 40 years. Regional banks can now move money bilaterally to other regional banks without having to relay those funds through an intermediary.”
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The drawback of being among the first institutions to adopt such technology is that it will only work when your counterparty also uses it. Until adoption becomes more widespread, actual use may be limited.
Fidor Bank in Germany had been the only other financial institution to adopt Ripple. Their integration, which took place in May of this year, allows the bank to transfer funds between partners in different countries and its customers to send money at a lower cost.
Suresh Ramamurthi, chairman and chief technology officer of CBW Bank, said:
“Today’s banks offer the equivalent of 300-year old paper ledgers converted to an electronic form – a digital skin on an antiquated transaction process. We’ll now be one of the first banks in the world to offer customers a reliable, compliant, safe and secure way to instantly send and receive money internationally. “
While the two banks pale in size compared to their national or state peers- both are single branch businesses- it is hoped that their adoption will put them ahead and serve as an example.