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Four of Canada’s Big Five banks participated in a test of blockchain technology designed to make cross-border payments faster and more efficient.

Financial technology consortium, R3, and a group of 12 global banks, including Bank of Montreal (BMO), Bank of Nova Scotia, Canadian Imperial Bank of Commerce and Royal Bank of Canada (RBC) tested the concept of using distributed financial technology and digital assets to carry out interbank cross-border payments. The hope is that the blockchain technology can be deployed to make these payments faster and more efficient.

The trial aimed to examine whether technology and a digital asset known as XRP, developed by San Francisco-based startup Ripple, could be used to simplify the process of banks providing liquidity for cross-border payments.

Currently, banks do this by holding various currencies in local bank accounts around the world. The banks tested the use of digital assets to replace these arrangements, which is costly because banks have to use capital to fund these accounts.

“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 accounts,” the parties say in a statement. “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,” says David Rutter, CEO of R3, in a statement. “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.”

“This technology will be a catalyst in reducing complexity, streamlining processes and ultimately lowering the significant costs associated with interbank cross-border payments, which will benefit both banks and their customers in the years ahead,” says Andrew Irvine, head of Canadian commercial banking and partnerships at BMO, in a statement.

“Trial projects like this and the knowledge we gain from them are helping us build a path for the future of payments and deepen the industry’s knowledge on the potential blockchain may have for better payments management worldwide,” adds Carolyn Burke, head of regulatory payments with RBC, in a statement.

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