Ripple’s distributed financial technology allows for banks around the world to directly transact with each other without the need for a central counterparty or correspondent.

1. RIPPLE – PAYMENT
PROTOCOL
NIKHIL BHIDE

2. INTRODUCTION
• Ripple is an Internet Protocol (IP)-based technology for banks to clear
and settle transactions in real-time via a distributed network
• Ripple is a internet protocol which works on the consensus
• Consensus process enables payment exchanges and remittance
without need of centralized clearing house
• Ripple’s distributed financial technology allows banks to directly
transact with other banks to settle transactions in real time
• Ripple provides an alternative to today’s global payment
infrastructure

3. WHAT IS RIPPLE?
• A Basic infrastructure for payment systems – Ripple itself is not a payment system
• A Ledgering and funds-exchange technology for clearing and settlement
• A Neutral transaction protocol for global connectivity
source : https://ripple.com/files/ripple_solutions_guide.pdf

4. WHO CAN USE RIPPLE?
Directly by interbank payment network members, operators and
liquidity providers
• Network members such as banks, financial service businesses
• Network operators such as payment networks, clearinghouses
• Liquidity providers like central banks, banks and non-bank
market makers

5. CROSS BORDER PAYMENTS - TODAY
• Involves delays; generally takes around 2-4 days
• Counterparty risks
• Involves costs and fees; settlement costs are high
• lengthy settlement times, and a poor customer experience
• Less transparent

6. CROSS BORDER PAYMENTS FLOW - TODAY
• Most banks relay transactions through a network of correspondents
• More Cost
• Cross-border payments have to be routed through a series of counterparties
Sender
Bank
Central
Counterpar
Sending
Correspond
ent
Central
Counterpar
Receiving
Correspond
ent
Receiver
Bank
Australian
Debtor
French
Debtor
SEPA

7. CROSS BORDER PAYMENTS FLOW – TODAY
(USING SWIFT)
• Country - Receiver
Messaging Infrastructure
Debto
r
Sender
Bank
Payment
System
Correspondent – Sender
Correspondent Banking
Fee
Payment
System
Correspondent –
Receiver
Correspondent Banking
Fee
Credit
or
Receiver
Bank
• Correspondent Banking
Country - Sender

8. CROSS BORDER PAYMENTS FLOW – RIPPLE
Sender
Bank
Liquidity Provider -1
USD to EUR
Cost of FX – X USD
Liquidity Provider - 2
USD to EUR
Cost of FX – 2X USD
Receiving
Bank
source : https://ripple.com/solutions/executive-summary-for-financial-institutions/

9. RIPPLE – KEY COMPONENTS
Key components of Ripple
source : https://ripple.com/solutions/executive-summary-for-financial-institutions/

10. RIPPLE NETWORK
• A distributed system which does not require central operator
• The Ripple network contains the Ripple Consensus Ledger (RCL)
• RCL is a secure distributed ledger which uses Consensus process to
settle transactions
• RCL holds the order book with bid/ask offers from payment initiators
and liquidity providers
• Ripple Connect connects to the Ripple Consensus Ledger over WSS to
settle payments in near real-time on the RCL

11. RIPPLE STREAM
• An order book management system
• Enables FX trading desks to facilitate FX markets on the RCL
• RCL holds the order book with bid/ask offers from payment
initiators and liquidity providers
• Enables cross currency payments using foreign exchange

12. RIPPLE CONNECT
• Component that processes international payments for banks
• Communicates with the Ripple network to get the lowest
currency quotes
• Provides secured Rest apis for communication
• Connects to the receiving bank’s Ripple Connect to exchange
KYC and risk information, fees, payment details and expected
time of funds delivery
• Provides information about total costs of the transaction to
sending bank

13. RIPPLE CONNECT INTEGRATION
• Payment processing involves 6 workflows
• Rest Connect has exposed Restful services
• The services are secure, reliable and highly available
• Integration involves work flow development; all workflows are
serially executed
• Except first two work flow are workflows are based on event
pull model

14. RIPPLE CONNECT INTEGRATION
• GetQuote
 Initial sender requests for a quote from sending institution
 Sender provides sender details, final receiver details, amount and currency to be received
 Ripple connect instance at sending institution provides sender FX rate for the payment; response also
includes fees
o It involves communication with Ripple connect at receiving end
o Querying Ripple network
o Path finding algorithm
 Payment object is in “quoted” state
• AcceptQuote
 Initial Sender gets the quote (previous step)
 Reviews quote and approves/rejects the quote
 Payment object is in “accepted” state

15. RIPPLE CONNECT INTEGRATION
• LockQuote (Receiver)
 Receiving institution polls its Ripple Connect instance for payments in an "accepted" state
 Receiving institute retrieves any additional information (such as PII) requested by the
sending institution
 Submits Lock Request
 Payment status is “locked”
• Submit Payment (Sender)
 Sender polls for payments which are in “locked” status
 Sender performs essential activities such as posting, compliance
 Sender executes submit payment request
 Payment status is in “In_Progress”

16. RIPPLE CONNECT INTEGRATION
• Submit Payment (Receiver)
 Receiver polls for payments which are in “In_Progress” status
 Receiver performs essential activities such as posting
 Sender executes submit payment request
 Payment status is in “Succeeded”
 Payment is complete from receiver side
 Payment is complete on ripple network
• Complete Payment (Sender)
 Sender polls for payments which are in “Succeeded” status
 Sender marks payment as complete
 End to end payment is complete

17. COMPLIANCE
The regulatory treatment of Ripple is dependent on several factors, such as:
• The type client being serviced
• Country and geographic region of operations
• Volume and scope of activity
• Other factors determined by financial institution or regulator
• Ripple has engaged with central banks and regulators globally to educate them on distributed
networks
• Ripple works with each financial institution to identify and meet all relevant regulatory requirements
ahead of integration
source : https://ripple.com/solutions/executive-summary-for-financial-institutions/

18. SECURITY
In financial world, especially in payment security is at most
important
Ripple provides highest level of security to ensure that
payments data is secured in every manner
Ripple employs different methodologies at different levels to
ensure highest level of security

19. SECURITY
• Cryptographic Security
 Financial transactions on Ripple are signed using industry-standard
cryptographic algorithms ECDSA and ED25519
 Ripple servers use public/private key cryptography to validate
transactions
 Each submitted transaction is signed with a unique digital signature
 Ripple apis are accessed using secured access token based mechanism
source : https://ripple.com/files/ripple_solutions_guide.pdf

20. SECURITY
• Payment Data Separation
 Ripple provides a layer of separation and security between payment data and
settlement
 Actual payment data is encrypted and shared only between the two
institutions making payments to each other
• Payment Data Separation
 Communication is over secure HTTPS using OAuth 2.0
 Ripple Connect connects to the Ripple Consensus Ledger over WSS (Secure
websockets)
 Ripple network leverages TLS to ensure communication is secure between all
the nodes on the network
https://ripple.com/files/ripple_solutions_guide.pdf

21. BANKS ARE ADOPTING RIPPLE
• 10 of the top 50 banks work with Ripple
• 25 active integrations including integration with DH’s payment
hub
• 60+ countries accessible though Ripple network
• 116M exchanges processed on the Ripple network

22. RIPPLE BENEFITS
• Enables banks to settle cross border payments in real time
• Lower operational costs and settlement risk
• Complete transparency
• No need of intermediaries, correspondent banking
relationships

23. RIPPLE USE CASE
 Direct bank-to-bank settlement
 International Transaction Banking Service
• Banks can provide settlement service to other regional banks
 International Corporate Payments
• Banks can offer real-time, on-demand international payment services for their corporate customers
 Cross-Border Intra-Bank Currency Transfers
• Banks with branches in different countries can use Ripple to transfer funds between their entities in
different countries at a fraction of time and cost
• Enables bank’s treasury to allocate capital more efficiently across international operations
 Remittance Service for Retail Customers
• Ripple’s real-time settlement and complete transaction traceability lowers the total cost of
settlement
• Ripple enables banks to offer low-value international payments to their retail customers

24. SUMMARY
• With Ripple, It takes 3-6 seconds for cross border payments
compared to 2-4 days
• Ripple reduces settlement risks
• Ripple eliminates intermediaries, midpoint failure, delays, lifting fees
• Ripple minimizes exchange spreads, credit risk, collateral costs
• Ripple connect provides instant, bilateral and straight through
processing
• Ripple has cryptographically secured end-to-end payment flow with
transaction immutability and information redundancy