Ripple’s distributed financial technology allows for banks around the world to directly transact with each other without the need for a central counterparty or correspondent.
2. INTRODUCTION
• Ripple is an Internet Protocol (IP)-based technology for banks to clear
and settle transactions in real-time via a distributed network
• Ripple is a internet protocol which works on the consensus
• Consensus process enables payment exchanges and remittance
without need of centralized clearing house
• Ripple’s distributed financial technology allows banks to directly
transact with other banks to settle transactions in real time
• Ripple provides an alternative to today’s global payment
infrastructure
3. WHAT IS RIPPLE?
• A Basic infrastructure for payment systems – Ripple itself is not a payment system
• A Ledgering and funds-exchange technology for clearing and settlement
• A Neutral transaction protocol for global connectivity
source : https://ripple.com/files/ripple_solutions_guide.pdf
4. WHO CAN USE RIPPLE?
Directly by interbank payment network members, operators and
liquidity providers
• Network members such as banks, financial service businesses
• Network operators such as payment networks, clearinghouses
• Liquidity providers like central banks, banks and non-bank
market makers
5. CROSS BORDER PAYMENTS - TODAY
• Involves delays; generally takes around 2-4 days
• Counterparty risks
• Involves costs and fees; settlement costs are high
• lengthy settlement times, and a poor customer experience
• Less transparent
6. CROSS BORDER PAYMENTS FLOW - TODAY
• Most banks relay transactions through a network of correspondents
• More Cost
• Cross-border payments have to be routed through a series of counterparties
Sender
Bank
Central
Counterpar
Sending
Correspond
ent
Central
Counterpar
Receiving
Correspond
ent
Receiver
Bank
Australian
Debtor
French
Debtor
SEPA
7. CROSS BORDER PAYMENTS FLOW – TODAY
(USING SWIFT)
• Country - Receiver
Messaging Infrastructure
Debto
r
Sender
Bank
Payment
System
Correspondent – Sender
Correspondent Banking
Fee
Payment
System
Correspondent –
Receiver
Correspondent Banking
Fee
Credit
or
Receiver
Bank
• Correspondent Banking
Country - Sender
8. CROSS BORDER PAYMENTS FLOW – RIPPLE
Sender
Bank
Liquidity Provider -1
USD to EUR
Cost of FX – X USD
Liquidity Provider - 2
USD to EUR
Cost of FX – 2X USD
Receiving
Bank
source : https://ripple.com/solutions/executive-summary-for-financial-institutions/
10. RIPPLE NETWORK
• A distributed system which does not require central operator
• The Ripple network contains the Ripple Consensus Ledger (RCL)
• RCL is a secure distributed ledger which uses Consensus process to
settle transactions
• RCL holds the order book with bid/ask offers from payment initiators
and liquidity providers
• Ripple Connect connects to the Ripple Consensus Ledger over WSS to
settle payments in near real-time on the RCL
11. RIPPLE STREAM
• An order book management system
• Enables FX trading desks to facilitate FX markets on the RCL
• RCL holds the order book with bid/ask offers from payment
initiators and liquidity providers
• Enables cross currency payments using foreign exchange
12. RIPPLE CONNECT
• Component that processes international payments for banks
• Communicates with the Ripple network to get the lowest
currency quotes
• Provides secured Rest apis for communication
• Connects to the receiving bank’s Ripple Connect to exchange
KYC and risk information, fees, payment details and expected
time of funds delivery
• Provides information about total costs of the transaction to
sending bank
13. RIPPLE CONNECT INTEGRATION
• Payment processing involves 6 workflows
• Rest Connect has exposed Restful services
• The services are secure, reliable and highly available
• Integration involves work flow development; all workflows are
serially executed
• Except first two work flow are workflows are based on event
pull model
14. RIPPLE CONNECT INTEGRATION
• GetQuote
Initial sender requests for a quote from sending institution
Sender provides sender details, final receiver details, amount and currency to be received
Ripple connect instance at sending institution provides sender FX rate for the payment; response also
includes fees
o It involves communication with Ripple connect at receiving end
o Querying Ripple network
o Path finding algorithm
Payment object is in “quoted” state
• AcceptQuote
Initial Sender gets the quote (previous step)
Reviews quote and approves/rejects the quote
Payment object is in “accepted” state
15. RIPPLE CONNECT INTEGRATION
• LockQuote (Receiver)
Receiving institution polls its Ripple Connect instance for payments in an "accepted" state
Receiving institute retrieves any additional information (such as PII) requested by the
sending institution
Submits Lock Request
Payment status is “locked”
• Submit Payment (Sender)
Sender polls for payments which are in “locked” status
Sender performs essential activities such as posting, compliance
Sender executes submit payment request
Payment status is in “In_Progress”
16. RIPPLE CONNECT INTEGRATION
• Submit Payment (Receiver)
Receiver polls for payments which are in “In_Progress” status
Receiver performs essential activities such as posting
Sender executes submit payment request
Payment status is in “Succeeded”
Payment is complete from receiver side
Payment is complete on ripple network
• Complete Payment (Sender)
Sender polls for payments which are in “Succeeded” status
Sender marks payment as complete
End to end payment is complete
17. COMPLIANCE
The regulatory treatment of Ripple is dependent on several factors, such as:
• The type client being serviced
• Country and geographic region of operations
• Volume and scope of activity
• Other factors determined by financial institution or regulator
• Ripple has engaged with central banks and regulators globally to educate them on distributed
networks
• Ripple works with each financial institution to identify and meet all relevant regulatory requirements
ahead of integration
source : https://ripple.com/solutions/executive-summary-for-financial-institutions/
18. SECURITY
In financial world, especially in payment security is at most
important
Ripple provides highest level of security to ensure that
payments data is secured in every manner
Ripple employs different methodologies at different levels to
ensure highest level of security
19. SECURITY
• Cryptographic Security
Financial transactions on Ripple are signed using industry-standard
cryptographic algorithms ECDSA and ED25519
Ripple servers use public/private key cryptography to validate
transactions
Each submitted transaction is signed with a unique digital signature
Ripple apis are accessed using secured access token based mechanism
source : https://ripple.com/files/ripple_solutions_guide.pdf
20. SECURITY
• Payment Data Separation
Ripple provides a layer of separation and security between payment data and
settlement
Actual payment data is encrypted and shared only between the two
institutions making payments to each other
• Payment Data Separation
Communication is over secure HTTPS using OAuth 2.0
Ripple Connect connects to the Ripple Consensus Ledger over WSS (Secure
websockets)
Ripple network leverages TLS to ensure communication is secure between all
the nodes on the network
https://ripple.com/files/ripple_solutions_guide.pdf
21. BANKS ARE ADOPTING RIPPLE
• 10 of the top 50 banks work with Ripple
• 25 active integrations including integration with DH’s payment
hub
• 60+ countries accessible though Ripple network
• 116M exchanges processed on the Ripple network
22. RIPPLE BENEFITS
• Enables banks to settle cross border payments in real time
• Lower operational costs and settlement risk
• Complete transparency
• No need of intermediaries, correspondent banking
relationships
23. RIPPLE USE CASE
Direct bank-to-bank settlement
International Transaction Banking Service
• Banks can provide settlement service to other regional banks
International Corporate Payments
• Banks can offer real-time, on-demand international payment services for their corporate customers
Cross-Border Intra-Bank Currency Transfers
• Banks with branches in different countries can use Ripple to transfer funds between their entities in
different countries at a fraction of time and cost
• Enables bank’s treasury to allocate capital more efficiently across international operations
Remittance Service for Retail Customers
• Ripple’s real-time settlement and complete transaction traceability lowers the total cost of
settlement
• Ripple enables banks to offer low-value international payments to their retail customers
24. SUMMARY
• With Ripple, It takes 3-6 seconds for cross border payments
compared to 2-4 days
• Ripple reduces settlement risks
• Ripple eliminates intermediaries, midpoint failure, delays, lifting fees
• Ripple minimizes exchange spreads, credit risk, collateral costs
• Ripple connect provides instant, bilateral and straight through
processing
• Ripple has cryptographically secured end-to-end payment flow with
transaction immutability and information redundancy