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Cross Border Transaction on Ripple Network by IOU

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The IOU (I owe you) credit network by Ripple is one of the most advanced alternatives in the thriving field of decentralized payment systems. It exhibits a camouflaged nature but it is still maintaining some regulatory capabilities. It has motivated several financial institutions across the world to use Ripple for processing their daily transactions.


My Idea: 

Creating a Gateway using Ripple Network


Our system aims at improving the cross border transaction by creating a gateway using ripple network and evolve cross border transaction based on different IOU currencies. All the transactions takes place on the ripple network.  In particular, through our system, an user can send money from one country to the desired country with the desired currency (IOU). Here our partner banks will be using our gateway to send the money through the ripple network to facilitate cross border transaction. The workflow is briefed as follow-


User Case: User A (Banngladesh) wants to send money to User B(Saudi Arab), Here Saudi Arabia is the Remitting territory and Bangladesh is the Beneficiary territory.


  • Here Bank A is considered as remitting bank and Bank B is considered as Receiving Bank, they are already listed as partner banks in our system.
  • User A logs into our system & asked to give  proper User validation (KYC/AML checkup),. Now User A wants to send 100 Riyal to Bangladesh, User A will get the total information about fees of the transaction including all the FX rates, Transaction cost & Legal fees.
  • Then User A  will get the option to deposit the desired amount (100 Riyal ) to the partner Bank A. Then our system dispatches a notification about the remitted IOU (Riyal) to the beneficiary partner Bank B.
  • Bank B  receives notification to disburse 2000BDT to user B,. After that sonali Bank asks User B to give a proper authorization (PIN & KYC) to disburse it.
  • The Order Exchange Book contains the exchange rate of IOU conversion of Riyal(IOU) to BDT(IOU). 
  • So in a nutshell , Bank A ows 100 Riyal to our system and Our system owes 2000 BDT to Bank B.


Here we have discussed the cycle for One transaction sent from Saudi Arab to Bangladesh, after this Partner Banks will run settlement process.




1. Please suggest the probable settlement process among banks and our system.

2. Please suggest any system improvements & system flaws in this process.

3. Please suggest us compliance in detail in this system.

4. Is there any way to get certified from ripple for using the ripple payment network.

5. Can i connect with existing banks partnered with ripple?

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On 12/3/2020 at 2:03 PM, mobasher said:


  • So in a nutshell , Bank A ows 100 Riyal to our system and Our system owes 2000 BDT to Bank B.


That's not usually how it works. You wouldn't owe each other. You would settle instantly. 

You need to allow users to trade Riyal/BDT or Riyal/XRP and BDT/XRP. 

Users send payments of Riyal to bank, bank issues riyal IOU. With riyal IOU the user can buy sell XRP or anything they want on the ripple ledger. They are traders/ speculators/ market makers. 

BDT bank also issues BDT IOU's to users for trading. 

Then when you want to send a payment using Riyal, you Issue Riyal IOU's and use the IOU's to purchase BDT IOU's, either directly or through XRP.

You are settling the debt by selling to a market maker. You could have an in house market maker but allowing the public to buy and sell the IOU's will create more liquidity and will keep the prices within market value.

If bank a and b owe each other, how do they settle? How do they agree on the price? What if one bank owe's the other but the other one doesn't owe anything?

You mention an orderbook but who creates the orders? 

If the two banks have an agreement to owe each other then ok your method would work. But if you can settle instantly with XRP, you can send a payment to any ODL customer. 

Also ODL usually uses XRP but not ledger IOU's. There is more liquidity on centralized exchanges so ODL buys from centralised exchanges. 
bank > mexican exchange > XRP > japanese exchange > bank.

ODL goes to one exchange, buys xrp, sends the xrp to another exchange in another country and sells XRP for the destination currency. 

The whole point of XRP and the XRP ledger is settlement.

If you contact ripple you could discuss being an ODL client. I found a sar/xrp trading pair at https://www.rain.bh

example payment using ODL
saudi bank > sar > rain.bh > xrp > coinfield.com > BDT > bangladesh bank 

As I said previously if you don't use ODL and want to use the XRP ledger and IOU's you need to allow allow trading of your IOU on the ledger. Users need a way to deposit money in exchange for IOU's and a way to redeem IOU when they are done trading. 

I'll tag someone from ripple, they can help you better than I can. If you have any questions just ask me. I usually log in daily. I'm a developer so I can help you get started. 

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