by Edward Robinson
April 21, 2017, 2:01 AM GMT+3
- Big banks striving to take bitcoin technology out of the lab
- Ripple working with UBS, Bank of America, Santander, CIBC
Banco Bilbao Vizcaya Argentaria SA, Spain’s No. 2 lender, has executed its first cross-border payments through a system based on the software that supports bitcoin, the company announced Friday. Using a program built by Ripple, a San Francisco firm, BBVA has transferred about 50 euro-denominated payments to Mexico from Spain in seconds. Such transactions normally take up to four days to clear, the bank said.
BBVA plans to use Ripple’s distributed ledger offering to provide corporate customers a quicker and cheaper way to pay overseas suppliers and execute other international transactions, said Alicia Pertusa, head of the lender’s Digital Transformation in Investment Banking unit. Processing payments on Ripple costs, on average, 81 percent less than the correspondent banking network that’s been used to send payments around the world for decades, according to the company.
Ripple also lets companies track their payments like a FedEx package and see precisely how much it will cost to complete the transfer. The current method, which relies on the 40-year-old Swift messaging system, is incapable of providing either of these services. It’s also too rudimentary to convey details on what payments are for. This dearth of data has forced companies to maintain costly accounting operations to reconcile their overseas transactions.
"It’s not just the real-time transfer that’s important here but the information we can send with the payment," Pertusa said. "That’s very relevant for our clients because they could begin streamlining their reconciliation systems."
The bank plans to offer a small group of clients the chance to begin testing Ripple’s service in a few weeks, she said.
Financial institutions are striving to turn expectations around distributed ledger technology into reality. In March, a consortium led by Synaps Loans LLC -- a joint venture of data provider Ipreo and blockchain startup Symbiont -- used the innovation in a trial to automate trading in the leveraged loan market. Nasdaq has been using blockchain to process and record trades of privately-held shares. And R3, a New York-based consortium of more than 80 financial institutions, including Barclays Plc, Credit Suisse Group AG and HSBC Holdings Plc, has released its source code so developers can build applications for Corda, its distributed ledger platform.
Four-year-old Ripple is betting the international payments system, which processes more than $20 trillion in transactions annually, is ripe for an overhaul. The company has formed partnerships with Bank of America Corp., UBS Group AG, and Standard Chartered Plc, among other firms. Last May, employees at Banco Santander SA’s U.K. division started using Ripple’s cross-border payment app internally.
But Ripple may never become a true alternative unless BBVA and other partners begin accepting payments from one another on its network. Getting competitors as complicated and conservative as banks to join forces is no mean feat.
We are talking to several institutions, " said Marcus Treacher, Ripple’s global head of strategic accounts. "Negotiations are ongoing."