Ripple claims that its network and native currency could save banks up to 60% on costs associated with global interbank settlements.
While distributed ledger technology is routinely hailed as a potentially huge money saver for banks, hard figures are tricky to come by. Ripple has now crunched some numbers for its own offering and, perhaps unsurprisingly, found that it could help cut settlement costs dramatically.
"By matter of enabling instant, point-to-point settlement, Ripple reduces these liquidity requirements. And by matter of providing end-to-end visibility into each settlement, Ripple compresses payment operational costs associated with reconciling exceptions and failures," says the firm.
By using the Ripple network, a respondent bank can save 33% on international payments thanks to a 65% fall in liquidity costs, 48% drop in operational costs and 99% fall in Basel III expenses, according to the company's modelling.
Savings are ramped up if banks use Ripple's "native digital asset", XRP, as a bridge asset. By ditching nostro accounts for local currency for one consolidated XRP account, banks can allocate less total liquidity to service the same volume of international payments.
"As a result, respondent banks that use Ripple with XRP as a bridge currency can save up to 42 percent on costs today and up to 60 percent as XRP gains usage and volatility decreases," claims the paper (PDF).