The Commonwealth Bank of Australia (CBA) announced this week it will use Ripple technology to facilitate payments between its subsidiaries, describing distributed protocols as “the way of the future”.
Last May, Germany’s Fidor became the first bank to integrate Ripple’s protocol into its payments infrastructure, with two US banks, CBW Bank and Cross River Bank, following suit four months later.
Tech news site CIO quoted the CBA’s own Chief Information Officer David Whiteing as saying the bank had “done a whole bunch of experiments” with bitcoin and other cryptocurrency technologies.
Whiteing said he sees no reason why bank accounts could not be used to store fiat money, cryptocurrencies and other assets like store loyalty points in the future.
He added:
“Bitcoin is a protocol which is now being replicated by non-asset based vendors like Ripple and others. We absolutely see that’s where it’s going to go. The bank has a role to play in that.”
A spokesperson confirmed to CoinDesk that the CBA has been performing tests with cryptocurrency technologies.
The organisation will begin a wider experiment with one of its offshore subsidiaries to explore the benefits of intrabank transfers using these protocols, they said, adding:
“The idea is to test in a controlled environment what a bank-to-bank internal transfer might look like using crypto rather than existing payment providers. We are ensuring our testing remains internal within Commonwealth Bank Group and we continue to comply with all legal and regulatory requirements.”
Banking giant
While its decision to use Ripple for payments between subsidiaries remains experimental, the Commonwealth Bank‘s sheer size makes its announcement all the more significant.
The 104 year-old banking group is one of Australia’s ‘big four’. According to its 2014 Annual Report, it made AU$8.65bn ($6.84bn) profit and has over 44,300 full-time employees.
CBA recently acquired a digital banking-related business in South Africa, Tyme Capital.
Whiteing made several references to mobile banking and payments solutions, especially in Africa where 1.2 billion people have far greater access to mobile phone services than traditional banking networks.
The CBA’s mobile banking app in Australia already supports up to 15 international currencies, allowing its 3.5 million users to make instant payments in whichever one they choose. It “shouldn’t be that difficult” to add cryptocurrencies to that list, he said.
Asia-Pacific focus
Ripple Labs and its subsidiary XRP II appeared to be going through a rocky period after being fined $700,000 by the US Financial Crimes Enforcement Network (FinCEN) for non-reporting of certain transactions in 2013-14.
It bounced back just two weeks later, however, with an announcement it had raised $28m in Series A funding from several venture capital and technology companies.
As part of its expansion efforts, Ripple Labs announced at the beginning of April that it would open subsidiaries in the Asia-Pacific region to focus on the over $3tn in intra-Asia trade, which is expected to surpass European trade flows to be the world’s largest by 2016.
Its first regional office opened in Sydney under new managing director Dilip Rao, and is currently undertaking a local hiring drive.