The attached article is extremely clear in explaining the advantages of using lower risk alternatives to the traditional reliance on major banks for International Payments. It also explains issues related to transaction times this creates (in particular around liquidity). This firstly reduces the reliance on smaller Banks using larger Banks to carry out international payments. The regulatory costs of tying up sometimes enormous amounts of money for many days creates unnecessary costs and risks that are usually paid by the end users carrying out such payments. (The need to manage risks related to counter-parties etc).
The alternative world where transactions can happen in the same day, in fact in minutes instead of days, with pre-agreed costs and near real-time transactions become a reality and are here today. This final frontier to be closed is reliant on adoption. This however is changing everyday and with Ripples leading technology and its close working relationship with many leading and global banks including many of the Central Banks, means not if, but when this will become the normal 'modus operandi'.
The XRP coin which is independent but developed by Ripple enables a growing liquidity pool of the third largest crypto coin to allow for such transactions. As the coin acts as a liquidity provider for a very brief period of time, this allows for lower transaction costs, faster payments, lower counter party risks and knowing the costs before the transaction. Ripple is not reliant on XRP and can use the banks own liquidity or in theory other sources of liquidity if needs be (these may or may not be in existence today) however the concept of the Internet of Value* means there is no reason why not. *Which Ripple are supporters of.
International transactions already face hurdles and delays because of country-specific regulations and currencies. Exchanging one currency for another introduces a price and time variance that could impact pricing on each side of the exchange. This erodes the stability of the transaction – therefore the liquidity – and increases risk and cost. As a result, financial institutions must pre-fund nostro accounts on each side of a transaction in that country’s native currency. These account balances in a local currency improve liquidity by lowering the risk for the parties transacting. However, these accounts come at a high cost. According to a 2016 McKinsey Global Payments report, there is approximately $5 trillion dollars sitting dormant in these accounts around the world – tying up capital that could be used in more productive ways.