Related News

Olam bags US$625mn shariah-compliant facility

Kairos Risk snaps up credit and surety veteran Lim

Miga sticks by €349mn guarantee for African trade finance

Bank results show muted trade finance market

GTR Leaders in Trade: The shortlist

A group of banks has launched a pilot test for moving real funds between Singapore and Thailand on RippleNet, after being approached to do so by Mitsubishi Corporation.

Standard Chartered, MUFG Bank and its Thai subsidiary Bank of Ayudhya will use the results of the pilot to determine if the solution can be used in commercial projects.

RippleNet is a closed network created by banks in which they can use Ripple’s blockchain-based payment software, according to pre-determined rules and standards. It allows members to make payments in real-time, over multi-currency and multi-bank structures.

Moving money around Southeast Asia is a pain point for many companies and banks. With disparate currencies and regulations, it can be a lengthy, inefficient and costly process. The aim of this pilot is to remove some of these barriers and, as a result, improve Mitsubishi’s cash management position in the region.

This marks the first time a Japanese company will conduct cross-border payment over RippleNet.

“Mitsubishi Corporation came to us and said: ‘We have banks in different locations, but have a problem with moving funds – we think Ripple is a good starting point and a building block, so would you be able to build a solution around it?’,” Shirish Wadivkar, global head of correspondent banking products at Standard Chartered, explains to GTR.

He says that the technology, Ripple, is just a tool and that the real world application of this technology will be through RippleNet, which has been specifically designed to support cross-border payments by banks.

“We’re in testing mode with a lot of clients, so we don’t have a lot of volume, but we see a lot more testing flow going through us. These are not dummy transactions, they’re real value transactions,” he says of Standard Chartered’s use of the technology to date.

In other areas of business, customers are becoming accustomed to instant payments, but trade and cross-border settling lags behind. The race to provide instant payments to replace the usual days-long processing has seen Ripple aggressively on-board banks, with Swift, the traditionally dominant force in trade payments, launching its gpi service, which has helped reduce settling time significantly.

Nearly 50% of gpi payments are credited to end beneficiaries within 30 minutes, and “almost 100% of payments within 24 hours”, according to data Swift released in February to mark the one-year anniversary of the service’s launch.

Ripple says that the goal of this pilot is “to demonstrate the commercial viability of delivering high-speed cross-border payments between independent banks. As global trade continues to increase, the problems associated with cross-border payments are being experienced by smaller businesses as well. These companies don’t have the treasury resources or experience in navigating the pitfalls of today’s payment rails”.

For banks, the entry of Ripple and other players to the market adds choice that wasn’t available before, with RippleNet bringing levels of transparency and certainty to the transaction that were not previously possible, Wadivkar says.

He explains the “certainty proposition” of RippleNet: “It’s a weird way in a world which is coming to instant push notifications, that we have to work with billions of dollars moving across, without clear indication of when it was delivered, who has it, or what the charge is for.

“Certainty is possible on Ripple because the payment exchange goes into phases. The sending and receiving banks have dialogue. There’s a pre-check that happens. Both sending and receiving banks check the payment across various points, including account numbers, names, sanctions. Everything is checked before it is sent.

“When the sending bank presses the send button, metaphorically, it clears in seconds. The confirmation of the debit on the sending side is enough as a confirmation of credit on the receive side. DLT makes sure if you get debited, it will only be possible if there is credit on the other side. There’s a chat interface, a locking of transaction and execution of transaction that drives the debit and credit on the send and receive side.”