The National Commercial Bank (NCB) of Saudi Arabia, country's first established bank founded in 1953, and the second largest bank in the Middle East by total assets, is the latest financial institution to join RippleNet, a decentralized global network of banks and payment providers based on blockchain technology, which provides real-time messaging, clearing and settlement of financial transactions.
The NCB will connect to other financial institutions around the world through RippleNet. It will first connect to financial institutions in North America and Asia, starting in Singapore. These two payments corridors will offer immediate services to NCB’s customers (over 5.4 million worldwide) that they have not had access to before. Ripple’s blockchain technology also provides their customers with faster and more transparent international payment services.
For the last ten years, the Kingdom of Saudi Arabia (KSA) has been one of the largest sources of remittances in the world. According to the World Bank, 308 million dollars were sent to the KSA, and 37 billion dollars in remittances were sent from the country in 2016. This massive market is primarily comprised of the Kingdom of Saudi Arabia citizens and foreign workers who in 2018 numbered over 10 million. Additionally, both large corporates and small to medium enterprises (SMEs) are responsible for significant payment volume. SMEs, in particular, have been highlighted by the KSA government as crucial for future economic growth. Today these groups are served primarily by domestic financial institutions.
Earlier in February of this year, Saudi Arabian Monetary Authority (SAMA), the central bank for the KSA signed an agreement with Ripple to help banks in the KSA improve their payments infrastructure using xCurrent, Ripple’s enterprise software solution that enables banks to instantly settle cross-border payments with end-to-end tracking. This agreement enabled participating banks from the KSA to use xCurrent to instantly settle payments sent into and out of the country, with greater transparency and lower costs.
Another central bank, the Bank of England, has also supported the use of blockchain technology for payments. In 2017, the Bank through Ripple tested whether blockchain technology could enable Global Real Time Gross Settlement (RTGS) systems and successfully completed the proof of concept for the same. At the time, Dilip Rao, the global head of infrastructure innovation at Ripple, commented that central banks around the world are leaning into blockchain technology in recognition of how it can transform cross-border payments, resulting in lower barriers to trade and commerce for both corporates and consumers.
While Saudi Arabia is embracing blockchain technology, it has a cautious stance on cryptocurrencies. Last month, the standing committee formed by the country's government officials warned that the unauthorized virtual currencies are illegal inside the kingdom of Saudi Arabia because of their negative consequences and high risks on traders as they are out of government supervision.