Ripple Labs which has carved a niche for its Bitcoin-inspired payments network that allows institutions to conduct low-cost international money transfers without the intermediation of large Wall Street banks, announces that it has signed its first two US banks as customers. This will help the two banks transfer money abroad.
According to a source from the company out of the two banks, the first is 122-year-old CBW Bank of Topeka, Kansas. The second bank that has got the contract is Cross River Bank of Teaneck, NJ which according to the company source is a household name. The company believes their embrace of the Ripple model marks a milestone for the Silicon Valley startup.
The decision is being appreciated and welcomed by a lot of people as they believe that it could open the door for America’s embattled regional and community banks to recover control over a cross-border commercial banking business that was long ago ceded to bigger institutions. This will also give impetus to the digital currency expand further.
Will Allow Smaller Banks Transfer Money Abroad
In his statement to media Patrick Griffin, Ripple Lab’s executive vice-president of business development, appreciated the announcement and said the system allows smaller banks to transfer money abroad by connecting to existing Ripple clients that include Fidor Bank of Germany and others.
These banks according to Patrick Griffin could get an attractive opportunity to provide low-cost cross-border transfer services to other small US banks. However, according to him the big benefit is that smaller banks would no longer need to deal with “correspondent banks” such as J.P. Morgan & Co., HSBC Holdings, Standard & Chartered and Wells Fargo.
The Process Will Help Banks and Customers save Money While Transferring Money
Patrick Griffin said that as there won’t be any need to intermediate this business, it should also do away with the accompanying fees, foreign exchange “spread” costs and, most importantly, the large collateral commitments that the bigger banks periodically demand to act as the middleman.
This is going to be the big saver as according to Patrick Griffin this is the first viable alternative to correspondent banking in about 40 years. Mr. Griffin further admitted that regional banks can now move money bilaterally to other regional banks without having to relay those funds through an intermediary and this is going to help them save some money.
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