Cross-Border Payment Innovation: Ripple blockchain solution implemented in Banks

I extracted this article from my book, Chapter 2, “Blockchain for Cross Border Payment,” of the book “Blockchain in Banking,” published on Amazon. If you are interested in the subject, get your copy by clicking https://www.amazon.com/dp/B0DMWP2QSK

I discussed seven blockchain solutions banks primarily use for cross-border payments in the chapter. These solutions include Ripple, Steller, JPMorgan Onyx, Ethereum, IBM World Wire, R3 Corda, and Quorum. Today, my article will focus on “Ripple.” The reason for choosing Ripple, as it stands as the top solution, is that we evaluated the twenty functionalities of these seven solutions. Ripple ranked first in the cross-border payment category, scoring 176 out of 200. You can find the complete comparison details in section 3 of Chapter 2.

 Ripple (XRP): Transforming Cross-Border Payments with Blockchain

Ripple, a pioneer in blockchain technology, has established itself as a significant change in cross-border payment systems. With a mission to address the inefficiencies of traditional banking systems like SWIFT, Ripple introduces a faster, more transparent, and cost-effective solution through the XRP Ledger and RippleNet.

XRP Ledger Overview

The XRP Ledger (XRPL) is Ripple’s decentralized blockchain platform, designed to enable instant and secure international transactions. Unlike traditional blockchains relying on proof-of-work or proof-of-stake mechanisms, XRPL employs the Ripple Protocol Consensus Algorithm (RPCA). This allows transaction validation within 3-5 seconds, supporting up to 1,500 transactions per second (TPS). Its Federated Byzantine Agreement (FBA) ensures efficiency, security, and low latency.

By using XRP as a bridge currency, the ledger eliminates the need for pre-funded nostro/vostro accounts, reducing capital inefficiencies and providing instantaneous liquidity.

RippleNet and On-Demand Liquidity (ODL)

RippleNet connects financial institutions globally, enabling real-time settlements with end-to-end transparency. Key components include:

xCurrent: Provides real-time gross settlement (RTGS) and transaction tracking.

xRapid/ODL: Uses XRP for liquidity, eliminating pre-funded accounts. It ensures currency conversions in seconds at minimal costs.

xVia: Simplifies API integration for seamless cross-border payments.

ODL excels at providing immediate liquidity and reducing foreign exchange (FX) costs. For instance, a USD-to-EUR transfer involves converting USD to XRP, transferring XRP via the XRP Ledger, and reconverting it to EUR at the recipient's end—all within seconds.

Advantages of Ripple

1. Speed: Settlement in seconds compared to days via traditional systems.
2. Cost Efficiency: Eliminates intermediaries, reducing transaction fees to less than a penny.
3. Transparency: Public blockchain ensures real-time tracking and dispute-free operations.
4. Scalability: Handles high transaction volumes essential for global adoption.
5. Security: Decentralized architecture ensures tamper-proof transactions.

Global Adoption

RippleNet has partnered with over 300 financial institutions, including notable players like Santander and SBI Holdings. These partnerships highlight Ripple’s effectiveness in regions like Asia and the Middle East, where cross-border remittances demand speed and cost efficiency.

Challenges and Future Potential

Ripple faces regulatory challenges despite its advantages, particularly with XRP’s legal classification. However, its growing adoption and ability to address liquidity and operational inefficiencies position it as a strong contender to traditional systems.

Ripple’s blockchain-driven innovation has redefined cross-border payments, offering a modern global solution for banks and financial institutions. The increasing adoption of Ripple will drive the transformation of international financial transactions.

A Real-World Blockchain Use Case

Santander’s Ripple-Powered One Pay FX:

Santander, a global banking leader, implemented Ripple’s blockchain solution, RippleNet, to launch One Pay FX, a mobile app designed to revolutionize cross-border payments. This partnership highlights blockchain’s transformative impact on traditional banking challenges like delays, high costs, and lack of transparency.

Ripple Solution Implemented: RippleNet & xCurrent

RippleNet is a network of financial institutions in over 40 countries that send money globally using blockchain with global standardization. Using xCurrent, one of the backbone technologies on RippleNet, Santander has conducted virtually instant, less expensive, and more transparent cross-border transactions.

Why Ripple?

Santander chose Ripple for several reasons, one of which is processing speed. Ripple’s product, xCurrent, can handle transactions in just a few seconds faster than any other available system. Another reason is cost savings. Ripple’s blockchain technology reduces the need for transaction intermediaries, leading to lower operational and transaction costs. Ripple offers transparency through real-time payment tracking and pre-validation, providing a clear view of the payment journey, exchange rates, and cost. Last, Ripple’s implementation stimulation allows for an automatic process flow.

Challenges in Traditional Cross-Border Payments

Delays: Traditional systems like SWIFT require multiple intermediaries, leading to settlement times of 2–5 days.

High Costs: Intermediary and correspondent bank fees inflate transaction costs.

Lack of Transparency: Payment tracking is limited, causing dissatisfaction for users needing real-time updates.

Ripple Solution Implementation

Santander integrated RippleNet’s xCurrent technology, ensuring near-instant transactions, cost efficiency, and complete transparency. This blockchain-enabled infrastructure allowed:

• Real-time tracking of payments.
• Elimination of intermediaries, reducing costs.
• Secure and compliant processes, adhering to KYC/AML standards.

Key Features of One Pay FX

1. Real-Time Updates: Customers can monitor payment status, similar to package tracking.
2. Exchange Rate Transparency: Users view exchange rates and fees upfront, ensuring predictability.
3. Instant Settlement: Payments that previously took days are now settled within minutes.

Operational Process

1. Customers start payments via the “One Pay FX” app, entering details such as currency and recipient.
2. RippleNet connects sending and receiving banks using encrypted communication.
3. Transactions are validated and settled in real time using Ripple’s Interledger Protocol (ILP).
4. Customers receive immediate confirmation once funds are delivered.

Benefits Achieved

Speed: Settlement times reduced from days to minutes.

Cost Reduction: Lower operational costs allowed Santander to offer competitive pricing to customers.

Enhanced Customer Experience: Transparency and speed boosted customer satisfaction significantly.

Strategic Expansion

Santander has expanded One Pay FX across major markets, including Spain, the UK, Brazil, and Poland, leveraging Ripple’s scalable infrastructure. This adoption positions Santander as a pioneer in blockchain-powered cross-border payments.

Through One Pay FX, Santander has set a benchmark for how blockchain can address inefficiencies in banking, providing faster, cheaper, and more transparent services.

Blockchain compression among top 7 blockchain solutions in cross border payment.

Total Score Calculation

Let’s calculate the total score for each blockchain by summing the scores across all 20 functionalities.

Blockchain

Total Score

Ripple 176

Stellar 165

Onyx (JPM Coin) 163

Ethereum 138

Corda 147

Quorum 164

IBM Blockchain 149

 Ripple (XRP Ledger)

• Average Score: 8.8
• Best Functionality: Transaction Settlement Speed & Liquidity Management/Bridging Assets (Score: 10)Ripple’s XRP Ledger offers near-instant settlement times (within seconds) and excels in liquidity management. Its use of XRP as a bridging asset streamlines FX conversions, reducing reliance on pre-funded nostro accounts.
• Worst Functionality: Network Consensus Validity (Score: 8)While Ripple’s consensus mechanism enables fast transactions, it has been criticized for its relative centralization and reliance on a limited set of validators, which may affect its decentralization and robustness.

 See full compression in my book; get it by clicking https://www.amazon.com/dp/B0DMWP2QSK