1.
Anil Kumar Nayak
Principal Consultant
Ripple (payment protocol) for Settlements on Blockchain
Anil Nayak 1

2.
Takeaways : Introduction to Ripple
• What is Payment?
• Current Payment Infrastructure and Participants
• How can Blockchain disrupt current way of achieving end goal?
• Introduction to Ripple Blockchain
• Introduction to Consensus
• How to use Ripple Blockchain to achieve Consensus and make payments?

3.
What is Payment
Debit Credit
Account 1 Account 2
Payment
Payment For ?
Cross Border FX … ?
Instrument Used ?
Processing and Clearing, how ?
Finally the Settlement
Submission
Bank’s Internal
Processing
Clearing
Interbank
Settlement
Bank’s Internal
Processing
Information and
Communication
Backend is Changing

4.
Capital Markets: Delivery versus Payment (DvP)
• Delivery versus payment or DvP is a common form of settlement for securities.
• The process involves the simultaneous delivery of all documents necessary to give
effect to a transfer of securities in exchange for the receipt of the stipulated payment
amount.

5.
Current Payment Infrastructure and Participants
Real Time Gross
Settlement
Designated Time Net
Settlement
Hybrid
Systems
Country/Area System Type
Large Value Payment Systems
Euro Area TARGET2 RTGS
Euro Area EURO1 Multilateral Netting (MN)
Canada LVTS Multilateral Netting (MN)
Japan BOJ-NET RTGS
Japan FXYCS RTGS
United Kingdom CHAPS RTGS
United States Fedwire RTGS
United States CHIPS MN/BN/BA
Global CLS RTGS
Retail Payment Systems
Euro Area STEP2 Batch Settlement (BA)
Euro Area CORE, RPS Multilateral Netting (MN)
Euro Area Equens MN/BA
United Kingdom VOCA (Formerly BACS) Netting (N)
United States FedACH Batch Settlement (BA)
Canada ACSS Multilateral Netting (MN)
Japan Zengin System Multilateral Netting (MN)
IMPS, etc.

6.
SWIFT (Society for Worldwide Interbank Financial Telecommunication )
MT 1XX Customer Payments
MT 2XX Financial Institution Transfers
MT 103 message details . These fields are referred to as tags.
Field Field Name
:20 Transaction Reference Number
:23B Bank Operation Code
:32A Value Date / Currency / Inter bank Settled
:33B Currency / Original Ordered Amount
:50A, F or K Ordering Customer (Payer)
:52A or D Ordering Institution (Payer's Bank)
:53A, B or D Sender's Correspondent (Bank)
:54A, B or D Receiver's Correspondent (Bank)
:56A, C or D Intermediary (Bank)
:57A, B, C or D Account with Institution (Beneficiary's Bank)
:59 or 59A Beneficiary
:70 Remittance Information
:71A Details of Charges (OUR/SHA/BEN)
:72 Sender to Receiver Information
:77B Regulatory Reporting

7.
Directive on Payment Services
(PSD)
• Standardisation and The Directive on Payment Services (PSD) provides the legal
foundation for the creation of an EU-wide single market for payments.
• Directive on Payment Services (PSD2). Standardise and make interoperable card,
internet and mobile payments. Reduce barriers to entry, in particular for card and
internet payments.
• Why ?
• FinTech and Technology is changing the Industry

8.
Payment Works: Present
1. SWIFT Messaging as communication
2. Reconciliation (Nostro Vostro) – Network
management
3. Settlement
4. Payment
Commit then validate by Reconciliation
One challenge with the existing model is it still relies on the need to maintain and reconcile two separately held versions of
the account statement (i.e. the Nostro account holder maintains their own mirror ledger). A number of challenges ensue,
including:
• poor payment transparency, for both banks and customers;
• onerous reconciliation activities and investigations;
• delays in advising of fund disbursement; and
• inefficiencies in management and usage of liquidity and funding.
These issues could be largely addressed if the industry were able to trust a single record of account, to be shared and
maintained by multiple correspondent banks.

9.
Automation and Efficiency
• Risk and fraud opportunities are a strengthening headache when it comes to instant
payments. Due to the time taken to clear and settle the transactions, risk and fraud
management
• Automation: RPA (Robotics Process Automation)
• Efficiency & Automation : Artificial Intelligence
• NEXT PROCESS ….
Blockchain– A Complete new paradigm

10.
Trust a single record of account
A distributed ledger is a consensus of
replicated, shared, and synchronized
digital data geographically spread across
multiple sites, countries, and/or institutions.
Consensus Process
The process a group of peers responsible for
maintaining a distributed ledger use to reach
consensus on the ledger’s contents.
Reconcile then Commit

11.
What is Blockchain (for business network)
1. Shared ledger ( where provenance of information is clear and transparent.
Transactions will be immutable (unchangeable) and final)
2. Privacy and confidentiality (Cryptography)
3. Consensus
4. Smart contracts
• It’s a Database where commit is done post consensus
• Ripple is Private Blockchain Platform
• software platform. a major piece of software, as an operating system, an operating
environment, or a database, under which various smaller application programs can
be designed to run.

12.
Interledger (ILP) and Ripple Connect
ILP Protocol
Interledger Protocol (ILP)
All banks and payment providers — from the smallest to the largest — can leverage the Interledger Protocol to
securely and efficiently transact cross currency. ILP can work with any new network or system, regardless of its
underlying technology. It ensures the payment speed and certainty necessary to service high volumes of all payment
types and sizes, while making them cost-effective for customers and profitable for banks.
Ripple Connect
Ripple Connect links the ledgers of financial institutions through ILP for real-time settlement of cross-border payments
in a way that preserves the ledger and transaction privacy of the financial institution. Additionally, Ripple Connect
provides a way for banks to exchange originator and beneficiary information, fees and the estimated delivery time of
the payment before it is initiated — providing unprecedented visibility into each transaction.

13.
Settlement on ILP
Settlement on ILP using Banks current Infrastructure
ILP Ledger coordinates fund movement between institution to settle the payments

14.
Liquidity

15.
Payment Initiation
Forex liquidity providers, along with market makers, aim at lowering volatility on the
market, providing uninterrupted transactions and optimal price policy, and supporting
the volume of transactions.

16.
Coordination

17.
Cryptographic Hold of Fund (Escrow)
Simultaneous
Release
No Settlement Risk
Executes or Fails

18.
Ripple
All party are part of Ripple post KYC and it’s a private ledger

19.
Consensus
Ripple Protocol Components
• Server
• Ledger
• Last Closed Ledger
• Open Ledger
• Unique Node List
(UNL)
• Proposer

20.
What is Ripple again
• Ripple is a distributed financial technology that enables real-time fund settlement between banks
across currencies, geographies and payment networks via Consensus (DLT)

21.
Ripple as a common ledger to clear and settle transactions
• Ripple is an Internet-based technology for directly connecting banks and payment
systems. Banks can use Ripple as a common ledger to clear and settle transactions in
real-time at the lowest-possible cost. Ripple structurally alters the payment process
by enabling:
• Bilateral settlement: Eliminates intermediaries, midpoint failure, delays, lifting fees
• Real-time funding: Minimizes exchange spreads (basis risk), credit risk, collateral
costs
Risk Managed

22.
Ripple: Open source distributed ledger
• A toolbox with entity management, pre-transaction negotiation, payment execution
and payment notification functions
• Holds balances of different items of value, which can be exchanged using a path-
finding algorithm
• Confirms transactions (without a central operator) in 5 seconds
• Path finds the most efficient way to exchange value (i.e.: execute a currency trade
with best liquidity provider)
• Payment Service Provider (PSP) would create a copy of their ledger on Ripple –
keeping collateral on its existing ledger – select counterparts, the algorithm selects
the more efficient path, the consensus settles the transaction
• Alternative to correspondent banking: would enable real time bank-to-bank cross-
currency payments at low cost, not tying up liquidity
Start your Payment Business

23.
Thank You
Please attend the Blockchain Bootcamp as
next step …….
BENEFITS FOR SYSTEM INTEGRATORS & TECHNOLOGY PARTNERS
Ability to expand their offering to banks to include a real-time settlement
infrastructure solution
Solutions for corporates to address their current difficulties in international
payments, with increased speed, certainty and reduced cost through Ripple
Ability to expand their corporate working capital solutions portfolio with access
to real-time international payments technology
“Playtime is over, show me the value.”

24.
Appendix
• How Ripple works https://www.youtube.com/watch?v=5e2jDFL1kKI
• Consensus https://www.youtube.com/watch?v=NHvPkS09LAI
• Consensus Technical https://www.youtube.com/watch?v=7abKUs9tYZg
• Other Info https://www.youtube.com/channel/UCjok1uTSBUgvRYQaASz6YWw