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Ripple Labs today announced a partnership with Earthport, across-border payments service provider.
“[Earthport] The London-based firm, which has offices inNew York and Dubai, will integrate the Ripple protocol alongside its existingpayments network. Through this global partnership, Earthport’s customers willbe able to leverage Ripple’s friction-free cross-border payments solution andbenefit from lower liquidity management costs, all while maintaining the robuststandards of compliance that regulators expect.”
The way Earthport’s model works is that it domestic paymentssystems (such as ACH), currently across 60 countries, into a single, globalnetwork that allows for faster, more transparent payments without banks havingto maintain expensive correspondent relationships which entails significantliquidity costs.
In my most recent report, “A SWIFT Disruption? Bitcoin and Peer-to-Peer Models Challengethe Remittance Business” I explain how the correspondent bankingsystem works and why it increases the costs of sending funds across borders.Relying on correspondent banking channels is an especially inefficient way tosend low value transactions across borders.
In essence, Ripple is a financialtechnology protocol that builds on Bitcoin’s blockchain technology to create asolution by which financial institutions can keep a public ledger of who oweswhat. The Ripple protocol also uses its own cryptocurrency, called XRP(pronounced “ripple”), which functions as a bridge currency that helpscounterparties resolve their transaction in the event of conflicting currencypreferences. By leveraging Ripple’s technology, Earthport has a protocol tomake transactions between its FI clients faster and more efficient.
Overview by Nikhil Jospeh, Senior Analyst, Emerging Technologies for Mercator Advisory Group
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