Distributed ledger start-up Ripple has confirmed that National Australia Bank and Westpac Banking Corp are among its growing network of global banks seeking to cut costs and boost the speed of making cross-border payments in competition with the global settlement engine SWIFT.
Ripple will announce on Friday it has completed a $US55 million ($74 million) Series B funding round. Investors include Standard Chartered, Santander Innoventures and Accenture Ventures, who join Google Ventures and Andreessen Horowitz on the register of the San Francisco-based company.
Ripple's Sydney-based Asia Pacific chief Dilip Rao said the platform will give the Australian banks immediate global connectivity. "We have a network coming together. It is not just pairs of banks doing things with each other, which has been happening over the past year, but we are creating a club that banks can join."
Ripple is continuing discussions with Commonwealth Bank of Australia and ANZ Banking Group about joining the network. CBA has done trials with the technology.
Ripple has created Ripple Connect, new technology to allow banks to talk to each other, and is developing its "interledger protocol", which will go live on October 1 and provide the foundation for banks to directly connect their ledgers with each other without an intermediary.
Under existing technology, international payments can take up to a week to process and banks have to pay significant costs for moving money, including treasury operations, payment processing, liquidity, FX and compliance. Ripple's is a real time system and costs are lower.
The Australian banks' work with Ripple comes as International Organisation for Standardisation (ISO) said this week that Standards Australia will manage an international committee developing blockchain standards to support interoperability and develop standards on privacy, security and terminology.
Treasurer Scott Morrison said that developments in blockchain technology have the potential to re-engineer transactions across the economy. "The benefits of this technology could be profound, extending right across our economy," Mr Morrison said.
King & Wood Mallesons partner Scott Farrell said international blockchain standards could play a key role in "creating greater market certainty and confidence with the use of this potentially transformative technology".
Ripple was established in 2012 and has focused its efforts on cross-border payments, but Mr Rao said this payments capability will ultimately underlie the exchange of other digital assets over blockchains.
"Banks have come to realise that only when there is a transfer of value, with a contract exchanging hands, that there is real transformation and real opportunity to re-engineer processes," he said.
"We think people will view Ripple as the underpinning of a variety of use cases that they will build on top, whether that be trade finance or trading other digital assets. And, once you have this network of banks, you can keep adding the additional use cases on top."
Royal Bank of Canada is using Ripple technology for remittances, while Standard Chartered and DBS of Singapore are using Ripple for trade finance, according to the online publication Coindesk.
It is understood that Westpac has already run a pilot on Ripple technology that moved real client money between Australia and New Zealand using the technology.
Fifteen of the world's top 50 global banks are members of the Ripple network. Other banks include Standard Chartered, Mizuho Financial Group, BMO Financial Group, Siam Commercial Bank and Shanghai Huarui Bank.
