Siam Commercial Bank pioneers RippleNet Multi-hop feature

Thailand’s Siam Commercial Bank (SCB) has become the first financial institution on RippleNet to use a feature called multi-hop.

This will allow it to settle payments on behalf of other financial institutions on the network, eliminating the need for a direct one-to-one connection (or bilateral relationship) between these organisations. Using Multi-hop, SCB will be able to receive and forward on a payment without a bilateral relationship between the originator and beneficiary institutions.

Cumbersome process

“A lack of a standard integration in ASEAN for regional cross-border payments currently requires expensive work arounds,” Ripple says in a blog post. “Neighbouring countries relying on the correspondent banking system have to first convert currency into US dollars, then settle across multiple correspondent banks before finally being exchanged to the currency used at the beneficiary institution. This cumbersome process requires numerous fees, including two sets of foreign exchange. As a result, there is little to no support for the low-value payments that small to medium enterprises (SMEs) and remitters need to make.”

With Multi-hop, financial institutions can connect directly to SCB, which can settle and payout across the region without exchanging currencies multiple times and adding 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 democratise access to those countries and make payments easier, regardless of payment size or their financial institution’s pool of liquidity,” says Ripple.

The benefits of Multi-hop go well beyond the financial institutions themselves, it adds. Customers of RippleNet institutions, including remitters and SMEs, will now 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.