Ok ill do my best here. In general, banks mistrust each other. There is simply a lot of risk involved as it pertains to the levels of money (read: value) we are talking about. So two banks who do not have a recognized romantic relationship won’t do business together. That is unless they create one.
Among other activities what they do to make a relationship is each one of the two banks takes some money and deposits it into the other lender. These accounts will be the nostro accounts. In that instance we are only discussing two banks. The truth is each of these banking institutions then has similar associations with a great many other banks. Each using their own nostro accounts. The money that is sitting down locked up in nostro accounts is brain bogglingly huge just.
Its value that is not working. Its spending most of its time sitting. In your situation you left out an important factor, the banks themselves do not need to touch up themselves. Ripple software would it for them. Just like when you send me an email you don’t need to actually change your tcp/ip configurations or plug in cables, a ton of stuff happens in the background you don’t need to be concerned about.
You type an email and press send. Which is got by me. Bank A creates an account with ripple and has the option of using existing nostro account funding to settle a transaction (current) or they may use up to stay (rapid). Current works like a faster version of swift. Bank A transmits a secure message through the oral network and standard bank B receives it and withdraws funds from a nostro accounts.
- It reorganized the teams and saved cost and cycle time
- The Physical Location
- The opposition prefers the status quo because it’s a ordinarily a tool for income suppression
- Corporate and business Correspondences
- The last word
For this to work tho, both banks have to have an already founded romantic relationship still. It permits banks who do not know each other or who don’t have a recognized relationship, to conduct business. Rather than take days. But just seconds. (Or less). In addition, it can completely free up trillions of dollars in value that happens to be locked in nostro accounts.
This really cannot be overstated. There are many areas where the friction of building a corridor in the original way is too great. Either there just isn’t a reliable enough entity available or the amount of value isn’t worthwhile. Lets look at this yet another way: the wire company is stringing new broadband cable because of its internet service. It costs them money to create the infrastructure.
They don’t have an infinite amount if money so they need to decide where it creates most sense to set up the new cables. Where do they go? Should they set up them in a highly filled city? Or spend the amount of money on a small country road with only one or two houses?
If you dont have experience with this let me assure you, cable companies dont bother with hard to attain places often. So those people up the united states street don’t get internet fast. They can’t create an online businesses or shop or browse the net. It might come as a shock to learn that money works kind of the same way.
There is a great deal of areas where in fact the cost for banking institutions to establish money systems is so excellent. Or the power they’ll gain is so low. That they don’t bother. What that amounts to is literally millions of people who are left out of the world of global business. Reducing the cost to send money to near zero, removing the necessity for banks to trust one another and freeing up trillions of dollars in value is what ripple is aiming at doing with art.