Keep financial information confidential with ILP’s complete transaction privacy. Image: Shutterstock
In the first installment of this blog series, we discussed how modern payments infrastructure enables scalability for the future. This concluding article explains why ensuring transaction privacy is crucial to going beyond blockchain.
Although interest in blockchain technology is on an exponential rise, with bank investment expected to reach $400 million by 2019, widespread adoption by financial institutions will only occur if the blockchain system or distributed ledger is enterprise-grade.
Banks are risk-averse to public blockchains, like Bitcoin’s, due to several key reasons:
- Settlement lag: settlement takes up to sixty minutes, creating exposure and risk.
- Unstable governance: systems are often untested and incomplete, and recent hacks make them vulnerable to nefarious actors.
- No transaction privacy: all transactions are recorded on a global public ledger, which could put institutions in a compromising position if identified.
Highly concerned about risk, compliance and KYC regulations, banks fear that public blockchains make it possible for other organizations or individuals to triangulate which transactions belong a particular institution. This vulnerability could potentially reveal confidential information to competitors or increase the threat of cyber attacks.
Private blockchains, such as those created with bank-issued digital assets, have been the industry’s response to privacy, but they only further fragment payment networks. This would result in an even more siloed currency landscape than what exists today.
To go beyond blockchain, Ripple advocates for the Interledger Protocol (ILP), which can work with any bank or non-traditional payment network, regardless of its underlying technology. All banks and payment providers — from the smallest to the largest — can leverage Interledger’s open protocol to power payments across networks globally.
ILP is an emerging global technical standard that provides the same benefits as public and private blockchains, including the certainty and auditability of transactions, but also ensures that transaction data remains private to only the transacting parties.
Ripple’s solution with ILP provides security for real-time cross-border settlement, using advanced encryption and bank-grade security features to keep sensitive information secure and compliant with the latest industry standards.
Using Ripple, customer data remains private and secure, behind the bank’s firewall. Financial transaction history is stored in the bank’s databases; transactions are not linked to any identifiable information and cannot be directly associated with any individual account or financial institution.
Additionally, Ripple does not have access to and does not store any information about the bank’s customers. Ripple is proven and trusted by leading banks to better serve their clients on a global scale.
To join our growing network of financial institutions, please contact us.