Financial innovation firm R3, along with twelve of its blockchain consortium member banks, recently trialed Ripple’s distributed financial technology and the potential for its digital asset to scale liquidity and reduce the costs and inefficiencies of interbank cross-border payments.

The trial was carried out over the Ripple network in R3’s Lab and Research Centre. The consortium member banks involved in the trial include Barclays, BMO Financial Group, CIBC, Intesa Sanpaolo, Macquarie Group, National Australia Bank (NAB), Natixis, Nordea, Royal Bank of Canada (RBC), Santander, Scotiabank, and Westpac Banking Corporation.

Currently, banks provision liquidity for cross-border payments by holding various currencies in local bank accounts world over, known as nostro accounts. Chris Larsen, CEO and co-founder of Ripple, noted that cross-border payments are too complex and costly, adding that distributed ledger technology could enable banks and their customers to send money in an efficient manner.

The trial introduced XRP, Ripple’s digital asset, to test the feasibility of reducing or retiring the use of current nostro accounts for local currency payouts. Among the existing digital assets at present, XRP boasts the fastest settlement speed, settling in about five seconds or less.

“This trial further validates that native digital assets like XRP can play a key role in lowering liquidity costs and enabling new types of corporate and consumer payments”, Larsen said.

The trial demonstrated that the Ripple network could enable banks to make markets for fiat currencies using XRP and then complete authenticated payments without multiple nostro accounts. Through a series of transactions, the participating banks explored how Ripple’s solution and XRP could enable both cost-cutting opportunities and revenue opportunities.

“The tradition of holding numerous currencies across multiple accounts in different countries is costly and inefficient. This is a legacy issue from a time when the technology did not exist to offer a viable alternative, however digital assets and distributed ledgers can now enable real-time exchange of currencies between parties anywhere in the world without the need for a third party intermediary. This prototype paves the way for a major overhaul of how banks process and settle cross border payments”, David Rutter, CEO of R3, said.