Santander, UniCredit, UBS, Reisebank, CIBC, ATB Financial and the National Bank of Abu Dhabi have adopted a blockchain payment system run by financial technology company Ripple.
Blockchain, a distributed ledger technology, is best known for underpinning trading involving the digital currency bitcoin, but it has many other potential uses. Broadly it can be likened to a type of database that, using cryptography, can be operated as a digital public ledger for recording information, such as the transfer of assets between two or more parties.
Ripple's ledger holds its order book with bid/ask offers, and a 'path-finding' algorithm allows it to find the lowest foreign exchange rate. The technology will reduce the time and cost of settlement, and is ideal for high volume, low value global transactions, Ripple said.
"Many of these financial institutions are already using Ripple to transfer actual money, and all are aiming to implement the technology in widespread commercial production," the company said.
Ripple’s network now includes 12 of the top 50 global banks, it said.
Ripple chief executive Chris Larsen said: "We’ve reached a tipping point where financial institutions are moving beyond blockchain experimentation and projects to real world applications that are driving significant bank-to-bank volume. This is a major step forward for the global financial system, and as the Ripple network grows, together we are paving the way for new connected commerce opportunities and growing demands for real-time, high volume, low value global payments."
Curtis Stange, ATB's chief operations officer said: "Using blockchain technology, ATB Financial completed an overseas payment in a matter of seconds. Without blockchain, that transaction would have taken two to six business days. Blockchain is transforming the way we store and move value. While there’s still a great deal to learn, the transaction we performed proves we can significantly reduce the time it takes to move money across borders. This could revolutionise banking for our customers."
Blockchain technologies are already being trialled by major financial firms. Earlier this year over 40 banks participated in testing which involved trading assets using five different distributed ledger technologies.