RTGS (real time gross settlement)

Ripple . Rumen. WHY? My thought on that as below.

[Suppose that]

1. You are owner of company A.
2. You are using KRW account with bank A in Korea.
3. You need to transfer USD 1MM today to bank B in N.Y and the final beneficiary is your company's branch account.
4. Bank A is managing USD account with bank C in N.Y

[Current your process]

1. You request FX to bank A. (Sell KRW equivalent USD1MM)
2. You request overseas(Korea to US) payment to bank A.
3. You provided documents to bank A to explain rationale of the overseas fund transfer.
   (be subjected to Foreign Exchange law in KR)
4. You provided instruction(account number, swift code, account holder' name, etc) of USD account with bank B in N.Y

[Current bank's process]

1. Quote FX rate between USD and KRW.
2. Debit KRW amount from company A's account as a result of FX transaction.
3. Checking underlying documents and report that to financial supervisory in Korea.
4. Send payment order in the swift message to release real USD from bank C to bank B.
5. Send credit order in the swift to bank C.
6. Bank C processes incoming payment after checking USD credit notice from bank B.

*Swift(Society of Worldwide Interbank Financial Telecommunication)

[Ripple gateway impact on the current process]

(1) number 4 and 5 in the current bank's process will be replaced by ripple gateway.

-It means that ripple booked USD transfer information by real time basis.
-It means that you can check the credit notice in your branch account in N.Y almost directly.
-It does not mean that Swift is slow. Swift is very fast message but it is a just message.
-Because as you may all know, Ripple is based on the blockchain which can register bank's transaction efficiently and safely.

(2) if my employee in my branch office in N.Y called me at 11PM (Korea Standard Time)
"Boss, I can't find the USD in our account yet..What am I supposed to do?"
"Oh...bank B was already closed!! I can't support anything.."
"But,,,boss here in NY is morning.."
But if you use Ripple you won't be worried like above situation. Because it will not be happenned.

[Because Ripple enables RTGS]

(1)Real time gross settlement(RTGS) concept is easy. Booking(paying) first and calculate later.
For your understanding,
supposed that
1)All banks in KR conduct paying, booking, and transferring KRW in every accounts through 12AM~11PM without real money transfer. (They just record banking transactions)
2)All banks calculate net amount through 11PM~12AM and paying or receiving as a result of today's banking transactions.

=>Clearing the real money settlement among banks after netting the balance through centralized system.

(2)Currently there are lots of centralized clearing banks or companies enabling RTGS.
For example, each countries' central bank is maintaining their own RTGS system.
KRW payment is real time in Korea also.

(3)However foreign currency payment to the other countries is not real time.

All the risks, delay of payment, uncertainty due to time lags, fees will be reduced by the ripple.

I just write what I think and know. Please feel free to contact me if you need to discuss about anything.