Thailand-based Siam Commercial Bank becomes the first financial institution to use RippleNet Multi-hop feature. Ripple announced it via their official Twitter handle and their official blog post on Medium. Ripple tweeted about this:
“@scb_thailand will be the first to use “multi-hop”, a key feature on RippleNet that allows financial institutions to forward and settle payments for other network institutions.”
Why is the feature being used?
Managing multiple digital assets and cryptocurrencies has always been an obstacle for overseas cross-border payments. Furthermore, it becomes a headache when dealing with developing countries, like, the Association of South Eastern Asian Nations (ASEAN) region.
Flourishing of the region financially didn’t happen due to lack of interest of correspondent banking. This results in there being an inefficiency and lack of security and transparency when dealing with cross-border payments there. Furthermore, most importantly, it costs a hefty sum as transaction fees.
The absence of a standardized method in dealing with payments in the ASEAN region requires a hefty amount of money for its workarounds.
Nearby countries rely on their correspondent banking firm, which carries out two foreign exchanges in total. First, they convert the amount into United States Dollar (USD), then settle it across other banking firms. Finally, the amount reaches the beneficiary institution after being exchanged with the original currency.
The process requires a huge transaction fee. Thus, it fails to support small and medium-sized businesses and enterprises.
What is Multi-Hop feature?
Multi-hop will allow financial institutions to settle the payments of other financial institutions using RippleNet’s blockchain technology.
This removes the need for a direct connection between the sender institution and the beneficiary institution. Furthermore, it will eliminate the need for multiple currency exchange and the huge transaction fee that concurs.
Multi-hop will make payments easier, safe, secure, cheaper and seamless in countries and regions like ASEAN.
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