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European Payments Council: Ripple for Inter-bank Payments

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Ripple Labs published an article with the European Payments Council (EPC) earlier this week, describing the role of the Ripple protocol for enabling real-time, cross-border payments.

The EPC is a banking industry association responsible for representing payment service providers, and is primarily responsible for governing the Single Euro Payments Area (SEPA), which facilitates payments in the EU.

As Ripple Labs business development team members Welly Sculley and Ryan Zagone noted in the piece:

In the absence of such global infrastructure, financial institutions rely on intermediaries – typically correspondent banks – to transfer funds across networks and borders. The reliance on intermediaries is capital-intensive, and leads to new costs, additional counterparty and settlement risk, as well as causes delays. Considering this is a period in which regulation and markets require lower risks, lower costs, and better services, these concerns affect the entire industry.

One solution, they argue, is to utilize an open payment protocol that leverages the principles of the decentralized Internet—by connecting existing networks and making them interoperable:

To achieve this end, we created an open internet-protocol (a public tool that is free to use) that enables PSPs to make necessary debits and credits to settle a payment. Rather than rely on an intermediary (e.g. a central counterparty), a PSP can use Ripple to securely and efficiently transact directly with other PSPs’ ledgers. Furthermore, this service does not rely on Ripple Labs – it is instead operated by participating PSPs and the third parties they authorise.

You can view the entire article on the EPC website.

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Top image via Flickr/Giampaolo Squarcina

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