Ripple (XRP) –Financial institutions see Nostro accounts as the backbone international banking for the fact that they provide liquidity, accounts used by large financial institution (in local market currencies) on both side of a transaction purposely to ease dealings.
Despite been used, Nostro accounts unnecessarily tie up millions of funds that could be used for something else. Also, Nostro accounts do not guarantee efficient, faster, lower cost and modern cross-border remitting. After fully understanding all these hindrances, Ripple (XRP) painstakingly solves the liquidity hardship for banks and other financial providers with its seamless solutions that completely address myriads of liquidity provisioning.
Above are extracted from a post published 0ctober 12, on Ripple (XRP) Insight.
With the use of its global payments network, RippleNet has provisions for three major types of liquidity arrangements. The first been traditional bank-to-bank fiat relationships, popularly regarded as Nostro accounts.
Ripple supports this arrangement to be able to achieve high volume transactions while also using existing bank-to-bank relationships and accounts.
Another is the third party fiat relationships that gives room for banks to highlight important nostro accounts, however, they enhance them with third party relationships which has the potential of overcoming high cost of liquidity.
The last is XRP. This is a cryptocurrency that is advisable for financial institutions to use in case they intend expediting their transactions. The token is more scalable and can achieve low cost transaction despite not having new or additional nostro accounts.
Fintech companies that lately deployed XRP for payment in U.S. to Mexico remittance corridor highlighted that their expenditure’s cut by 40-70% compared to traditional costs. Using XRP also reduces settlement time, the companies stated.
