The agreement between Saudi Arabian Monetary Authority (SAMA) and US-based financial technology company Ripple in managing a cross-border transaction of local banks will translate to savings of roughly $200-$400 million per year system-wide, according to credit rating agency Moody's.
On Wednesday, Asharq Al-Awsat reported Arab Exchange Market (AEM) Sec-Gen Fadi Khalaf as saying: "the cost of remittances is about 60 percent lower than cash transfers."
Ripple signed an agreement with SAMA to create the pilot program for cross-border payments, the first of its kind to be launched by a central bank. The agreement will allow participating Saudi banks to explore a solution for cross-border transactions using distributed ledger technology (DLT, or blockchain).
Khalaf indicated that Emirati banks are aiming for similar agreements.
Earlier last week, UAE Exchange entered into an agreement with Ripple to facilitate real-time cross-border remittance payments as it looks to bring the cost of transactions down for its customers.
Chief executive of UAE Exchange Group indicated that the early adoption of this "game-changing technology allows us to offer a competitive service, as it will have an impact on the speed and cost of cross-border transactions."
Ripple's Current program is expected to be implemented by SAMA to enable local banks to deploy cross-border transfers. Saudi Arabia has a large number of expatriate workers, who make a large number of transfers to their countries.
World Bank figures suggest the cost of such transactions is typically 7.1 percent of their overall value, but Moody's said this could halve if blockchain technology was adopted.
Last year, Bank of England completed a proof of concept with Ripple and concluded that DLT showed promise at enabling two separate real-time gross settlement systems to communicate and achieve seamless global interoperability.
Sec-Gen of AEM announced that a number of Arab investors began to consider investing in cryptocurrency after the recent gains, not to mention the bitcoin that peaked at $19 thousand per unit by the end of last year.
Speaking to Asharq Al-Awsat on the sidelines of the Capital Markets Summit in Cairo on Tuesday, Khalaf stated that the future of cryptocurrency in the world will be great, and the Arab region will join the wave.
SAMA said in a statement that it continues to support innovation in the field of digital payments by encouraging local banks to use the latest technologies and methods in this field.
The authority signed an agreement with Ripple two weeks ago in cooperation with a number of local banks to use the company's foreign remittance technology, a new technology that contributes to speeding up payments between countries and reducing their cost. A number of local banks will participate in the initial experience of this technology.
The agreement does not include the company's digital currency (XRP) or the purchase of shares in it, but the project is limited to the experience of transfers between local banks and some banks involved in service in other countries to accelerate these trans-boundary transfers.