In an official announcement, Ripple proclaims that Thailand’s “Siam Commercial Bank (SCB)” on RippleNet to explore “multi-hop” for international transactions. It would be the first of its kind in Thailand to utilize “cross-border payment method” that facilitate SCB to settle payments on behalf of other financial entities on the network.
Multi- Hop and SCB
Using Multi-hop financial institutions like SCB will be able to “eliminate the need for bilateral relationship across banks to settle payment”. Consequently, SCB will receive payment and forwarding it without “one-to-one connection” (or bilateral relationship). It aims at reducing the global transaction costs for parties involved; the banks, the institutions and the customers.
The report points ASEAN countries (Association of South Eastern Asian Nations) often face issue with cross-border payments. And here comes Ripple’s Multi-hop that manage cheap cross-border payments. Multi-hop streamline banking system by making the payment process easier nevertheless the size of payment or the liquidity of institutions.
Removing Bilateral Relationship
Ripple in an announcement notes that the neighboring countries are depending on the correspondent banking system “to convert currency into U.S dollars”. The process will then settle across correspondent banks before exchanging it to the currency used at the beneficiary institutions. As a result, this lengthy process requires huge fees to complete foreign exchange transactions and the Ripple’s multi-hop direct financial institutions connect to
SCB without exchanging currencies multiple times and avoid heavy fees.
The result is a seamless payments experience into and out of the ASEAN region. For smaller financial institutions which previously did not have the ability to make payments into ASEAN. Multi-hop will democratize access to those countries and make payments easier, regardless of payment size or their financial institution’s pool of liquidity.
Moreover, the announcement reveals remitters and SMEs will likely see their payments settle cheaper, faster and more transparently.
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