You would have one token only - say R3 token which has a fixed rate to each fiat currency.
Examples:
1 x R3 = $0.25
1 x R3 = £0.20
The same way that 1 x XRP currently equals $0.226
That's not possible. The various international currencies change value with respect to each other. While these changes are typically small, so are the costs and profits associated with payments.
The difference though is that R3 isnt a sellable token on any open market exchange or outside a banking system. Its purely an agreement between the banks to keep track of who is sending what and who is receiving what.
They already have this. They just do it for every fiat currency. The problem is that it doesn't actually move value. So it requires a separation between payment and settlement. The problem we're solving is the actual movement of value.
What ripple is doing with XRP is selling an open market token to the banks..but the banks dont need to use an open market one...surely they can use a closed-doors one? Why does the token that banks use have to be open market?
Because only a token that can be bought and sold has actual value and therefore can serve as an actual means of settlement. Imagine, for example, a European banking hub that needs to settle with an Indian banking hub. Market makers in India might well be willing to swap Rupees for XRP if they can use those Rupees to pick up Euros for cheap or use them to fund their own extraterritorial payments.
For sure banks will do these kinds of things, but I think XRP is well-positioned to compete with them. In particular, XRP is well-positioned to bridge these jurisdiction-specific and currency-specific domestic payment schemes.