Nostro/Vostro Accounts

When Bank A in the US needs to send money to Bank B's customer in Japan, it needs a way to deliver yen. The traditional solution is a nostro account: Bank A holds a pre-funded JPY account at a Japanese correspondent bank, and draws from it to settle payments. "Nostro" (Italian for "ours") is how Bank A refers to it; "Vostro" (Italian for "yours") is how the Japanese correspondent refers to the same account.

The problem: global banks collectively hold an estimated $27 trillion in correspondent-banking float and pre-funded nostro accounts (a figure Ripple cites in its institutional materials) to service cross-border payment corridors. This capital earns minimal return and is a pure operational cost. As payment volumes and corridors increase, more capital must be locked up.

Ripple's ODL product directly targets this inefficiency. Instead of pre-funding a nostro account, a bank uses ODL to convert source currency to XRP, bridge via the XRPL in seconds, and convert to destination currency on demand, reducing the need for pre-funded foreign currency reserves, as Ripple markets it. This is why "nostro account elimination" is central to Ripple's institutional sales pitch.