Cross-border blockchain payment network Ripple announced today that Siam Commercial Bank (SCB), the first bank in Thailand will now be the first financial institution on RippleNet to explore a key feature called “multi-hop”, which allows the bank to settle payments on behalf of other financial institutions on the network.
This eliminates the need for a direct one-to-one connection between financial institutions to settle a payment. Using multi-hop, SCB will be able to receive and then forward a payment without a bilateral relationship between the originator and beneficiary institutions.
With multi-hop, institutions can connect seamlessly to SCB, which can settle and payout across the ASEAN region without exchanging currencies multiple times and adding heavy fees.
Ripple noted the inefficient management of global liquidity as a hurdle for cross-border payments particularly for financial institutions representing the Association of South Eastern Asian Nations (ASEAN). This region has been underserved by correspondent banking, and as a result, cross-border payments into these countries are inefficient and hit with high fees.
For smaller financial institutions which previously did not have the ability to make payments into ASEAN, multi-hop aims to democratize access to those countries and make payments easier, regardless of payment size or their financial institution’s pool of liquidity.
The benefits of multi-hop go beyond the banking institutions. Ripple says that now, customers of RippleNet institutions, including remitters and SMEs, will see their payments settle faster, cheaper and more transparently. SMEs are estimated to be responsible for up to 60% of employment in the developing world, but that number is thought to be as high as 70% in ASEAN countries.
