How Ripplenet Can Solve Global Liquidity Problems
Recently, the Ripple blockchain explained how their Ripplenet solution can be used to solve the global liquidity challenges. This was done using an article on the Ripple Insights blog.
The first issue tackled by the blog is Nostro accounts. According to Ripple, Nostro accounts are fundamental to international banking as much as they are the primary source of the sector’s problems. Nostro accounts are the providers of liquidity because leading financial institutions store fiat currencies in them, enabling payment transactions to occur. Without such accounts, international payments would be impossible.
On the other hand, Nostro accounts hoard colossal amounts of money that could otherwise be used for constructive purposes. Therefore, they create capital inadequacies for institutions, add expenses and increase the risk associated with counterparties and fluctuation of currency exchange rates.
Secondly, the blog highlights the importance of liquidity and the role of Ripplenet. In this regard, the article states that organizations must have sufficient liquidity if they want to provide fast, affordable and modern transaction experiences to their users. Ripplenet ensures that institutions have adequate liquidity using flexible solutions that encompasses different types of liquidity provisioning.
Multiple Liquidity Provisions
The Ripplenet solution supports three types of liquidity provisions, namely traditional interbank fiat relationships, third-party fiat relationships and XRP. Traditional interbank fiat relationships, otherwise known as Nostro accounts, are supported by Ripplenet because they are useful for high volume transactions and are also compatible with existing bank infrastructure.
Regarding third-party fiat relationships, Ripple mentioned that banks use them to supplement Nostro accounts in mitigating the high costs of liquidity. Precisely, third-parties can be useful in handling medium and low volume transactions. On XRP, the blog states that banks can leverage XRP due to its speed, scalability and affordability to access low volume corridors without acquiring additional Nostro accounts. Thus, XRP is the best liquidity pool for transaction parties.
As expected, the blog lauded Ripplenet by saying that its pathfinding abilities enable financial institutions to deploy multiple liquidity provision within the same transaction to use their networks optimally. The inclusion of XRP further enhances the efficiency of the networks by reducing the expense on Nostro accounts, reducing cost through atomic processing and mitigating risks via real-time settlements and lower exposure to counterparties.
These arguments are backed by stats, with Ripple asserting that providers who use XRP in the US to Mexico remittance market saved up to 70% compared to traditional costs. Moreover, XRP reduced settlement periods from three days to two minutes.
Currently, Ripplenet is operational in over 40 countries worldwide, covering Asia, Africa, Europe and the Americas. The solution provides improved payment services to markets where remitters and small enterprises were previously underserved.
Overall, the demand for an affordable and swift international payment solution has increased significantly due to the massive growth of the remittance market.