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Siam Commercial Bank (SCB) has become the first financial institution on RippleNet to pioneer “multi-hop” feature.
Using this new feature, the bank would be able to settle frictionless payments on behalf of other financial institutions on the network. This will eliminate the need for a direct one-to-one connection between financial institutions to settle a payment.
This essentially means that SCB will be able to receive and forward on a payment without a bilateral relationship between the originator and beneficiary institutions.
The lack of a standard integration for regional cross-border payments in the Association of South Eastern Asian Nations (ASEAN) region makes cross-border payments into these countries inefficient and expensive. Neighboring countries relying on the correspondent banking system, first convert currency into U.S. dollars and then settle across multiple correspondent banks before finally being exchanged to the currency used at the beneficiary institution.
The multi-hop feature will make the process seamless by enabling financial institutions to connect directly with SCB, which can settle and payout across the region without exchanging currencies multiple times and adding heavy fees.
“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,” Ripple said. “The benefits of multi-hop go well beyond the financial institutions themselves. Now, the customers of RippleNet institutions, including remitters and SMEs, will see their payments settle faster, cheaper and more transparently.”
