ripple-north-americaRipple Labs made huge waves today, signing the first two U.S. banks to an agreement to use their open-source payment protocol.

Two U.S. banks, Cross River Bank in New Jersey and Kansas-based CBW Bank, proclaim their utilization of the Ripple currency protocol. This makes way for an instant transfer system with international transfers at no charge on Ripple’s network.

“It’s a big milestone,” said Ripple Labs Chief, Chris Larsen. “We’ve been working on our enterprise banking strategy for well over a year. It takes quite a while for banks to get going.”

Ripple’s Transaction Protocol (RTXP) is just like HTTP or SMTP (how emails are powered and transmitted) that permits one to send digital currency across the Internet-based distributed network. Ripple’s open-source protocol is similar to “The Blockchain” or “The Internet” itself in that no one owns it or controls it. Email systems use the SMTP protocol, so that you can send an email anywhere regardless of destination or URL.


How monetary flow systems should work versus today's outdated system
How monetary flow systems should work versus today’s outdated system

“Today, all inclusive, banks are associated through exclusive systems,” said Suresh Ramamurthi, executive and CTO of CBW Bank. “There’s no open standard for correspondence. Ripple empowers any bank to get to any bank on the system.”

Ramamurthi said one of his bank’s primary methods is global settlements, so he trusts the convention will help quicken development and join him to banks around the world. “At the end of the day, as the world gets smaller in regards to integrated distribution networks, and the speed of transactions expand, individuals need to send cash right away,” Ramamurthi said. In any case, it’s not exactly as simple as a bank flipping a switch to empower Ripple.

The U.S. has strict know-your-client (KYC) rules and regulations, particularly in terms of abroad installments. Funding terrorists fast is not what this technology is for. So Ramamurthi’s tech organization, Yantra Financial Technologies, has needed to assemble a new global compliance program that could stop a transaction in less than a second.

Ripple Labs: The Policy Issue Is Only a Challenge

Gilles Gade, president and Chief of Cross Stream Bank, saw the policy issue as a challenge, and not the end of the line for open-source protocols in the U.S.. His organization will be creating their set of “very stringent” compliance guidelines that be ready by Q1 of 2015. Ripple will become an alternative for customers, instead of supplanting its entire framework.

“The challenge was just trying to understand Ripple and how the protocol works. Banks are traditionally very skittish about getting into new technologies,” Gade said. “It’s a very elegant way to move money between point A to B.”

Cross Stream bank chose Ripple for two reasons. One, the way that its money could flow (you can exchange in the middle of Euros and dollars without touching cryptocurrencies) and that the operators on either end of the transaction are authorized banks.

Notwithstanding the guarantee of moment installments universally, the Ripple convention will take a bit of bank influence and instruction before it takes off, yet having FDIC-authorized banks in U.s. is a begin. Both banks join Germany’s Fidor Bank, which went onto Ripple in May, as pioneers for integrating traditional banking into the open-source system.

“We think it’s a big deal because these technologies have grown up quickly. All these banks want to move the value like we want to move information. These are not crazy ideas that are alternatives. These are real technologies that are solving a problem.”

says Ripple Labs CEO Chris Larsen.

Featured image of Shutterstock, photos courtesy of Ripple