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Comment by momothereal | Hacker News Reader

My understanding: Ripple is a company that aims to build a faster bank transfer protocol (faster than SWIFT, for example).

To achieve that speed, banks transfer a digital currency (XRP) issued by Ripple instead of traditional currencies. It takes a few seconds for XRP transactions to settle, instead of days for traditional currencies via SWIFT.

The value of this currency is decentralized, in the sense that people trade it with other currencies (which is also how Bitcoin, Ethereum etc. are valued).

In the eyes of the SEC, the fact that XRP is directly issued by Ripple makes it similar to issuing shares. Even if Ripple doesn't control the value of the shares (XRP), they still manage the supply.

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SWIFT used to take a days. Since Ripple was started, SWIFT have already created their new SWIFT gpi platform (which they say settles most cross-border payments in in minutes), signed up 4000+ members and apparently are now is doing over $300bn in transfers a day. Most developed countries already have free, real-time domestic transfers (UK Faster Payments, Australia's New Payments Platform, etc.), and it looks like SWIFT have just announced a next step of further integrating with these to speed up cross-border payments to seconds [0].

For small payments though, I've just used something like TransferWise which is great and really fast too.

The biggest problem with Ripple was that there was never actually any compelling need for the XRP token, because you'd need an extra currency conversion for a cross border payment... So I believe mostly the only way that they'd got partners to test out their system was to actually pay them from money they'd got selling XRP tokens to speculators.

1. https://www.swift.com/our-solutions/swift-gpi/instant-cross-...

In fiat transfer systems transactions aren't fast, they are submitted fast and are assumed to be complete enough for you to walk out, but they take usually about a month to properly complete. And TransferWise uses bank transfers as backend.

Where geographically are you basing that on? In another reply 6nf mentions Osko etc. on the New Payments Platform in Australia, which is fully settled in real-time, 24/7, but even before we had that our Bulk Electronic Clearing System (BECS) cleared and settled everything twice daily on business days and Real-Time Gross Settlement (RTGS) has existed for years for high-value domestic payments.

Cross-border payments have usually taken longer, but the point of my comment is that that is very quickly changing (and already has come a long way in just the last few years). So you may be thinking of older technology or places with less advanced banking systems than what a lot of countries have now?

I'm talking about Visa. You walk out right away, and transaction completes in background after a month.

That's rapidly changing. We have instant confirmed P2P bank transfers now in Australia via Osko and other services.

You probably talk about UX than underlying technology. https://nppa.com.au/fraud-and-security/ they say they have fraud control similar to that of banks.

>If you suspect you have been tricked into paying someone you should contact your financial institution immediately and report it to the police.

If you pay erroneously, what happens next?

If you overpay, you'll need to contact your friend or whoever and ask them to send it back.

If someone tricks you into sending them money, that's just fraud same as credit card fraud or wire transfer fraud or crypto scamming fraud. What are you getting at?

This is exactly as safe as the previous system which took up to 48 hours to transfer the money.

> It takes a few seconds for XRP transactions to settle, instead of days for traditional currencies via SWIFT

Just want to note that interbank transfers via Fedwire are (a) close to free and (b) instantaneous.

Fedwire is instantaneous for US domestic transfers, whereas international Fedwire transfers to non-Fedwire banks still rely on SWIFT as far as I know. The Ripple company offers solutions to replace SWIFT using XRP as the exchange currency.

> international Fedwire transfers to non-Fedwire banks still rely on SWIFT as far as I know

International wires are a bit of a mess. But there are alternatives to SWIFT.

Also, SWIFT is just a messaging protocol. The actual settlement is handled separately. This was Ripple’s original pitch, but it changed along the way.

Is there a precise overview/description somewhere about how international wire transfer actually works?

If I want to send someone a few USD and I know their IBAN or SWIFT + name, address, what does my bank do? Is there a Visa/MC for wire transfer? (I know that SWIFT operates a network for banks, but then how do banks settle? Is the SWIFT message a legal claim?)

Assuming you mean sending some USD from the US to an overseas recipient, it goes a bit like this:

1. Your bank sends a secure message to the overseas bank through the SWIFT network (this is where the SWIFT number is used for routing the message) to the recipient's bank, detailing the transaction.

2. Through the SWIFT standard message format, the overseas bank validates whether the account exists in their bank. Some additional screening is done at this stage to detect fraud, money laundering, etc.

3. Your bank and the overseas bank have a predefined agreement on a correspondent account, i.e. a bank account in the US owned by the overseas bank to receive USD. If everything checks out, your bank wires the money via a domestic system like Fedwire to settle the transaction.

4. The overseas bank confirms that the money was wired to their US account, and then adjusts the recipient's balance accordingly.

Does this mean that banks participating in international transfer need to have bank accounts located in each of the countries they participate in exchanges with?

> Does this mean that banks participating in international transfer need to have bank accounts located in each of the countries they participate in exchanges with?

Or have accounts with banks that have accounts overseas, yes. For example, Fidelity piggybacks on JPMorgan for a lot of its overseas transfers.

Thanks!

Is there a routing system between SWIFT members based on who has settlement (nostro/vostro) accounts between each other?

This sounds exactly like Facebook / Mark Zuckerberg's Libra cryptocurrency.

The currencies (Diem and XRP) would be similar in nature, since they're not mined but centrally issued, and their value is determined by a combination of factors (the issuance, decay, and trading).

As far as I know Libra/Diem is more customer-facing, whereas Ripple is mostly marketed to banks for faster international transfers.

And Diem is/will be a stablecoin backed by USD (I think?)

Which has now been rebranded to Diem.

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