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According to an official Ripple post, the Siam Commercial Bank in Thailand will be the first multi-hop financial institution, a new function aimed at eliminating inefficiencies and high commissions associated with cross-border payments in the traditional banking sector.
Multi-hop that operates directly from RippleNet will allow SCB to settle the frictionless payment on the Internet on behalf of other financial institutions. In this way, there will be better liquidity management because the feature eliminates the need for bilateral relations that are prevalent in the traditional banking settlement. Multi-hop will not only save time and latency of transactions but will also allow you to receive and forward payments without bilateral relationships, saving costs and time for banks in the Southeast Association Asian nations (ASEAN) region.
The inefficiencies and costs involved in the ASEAN region are the main reason why Ripple decided to pave the way for multi-hop with SCB. In this region, cross-border payment is expensive and literally inaccessible for small and medium-sized businesses that need financial means to send and receive money. A recent report by Ripple states that SMEs employ up to 60% in emerging countries. But it could be higher in the ASEAN region, where Ripple puts a rough estimate of 70 percent. Here, the cash displacement at the regional level involves converting local currency into reserve currency, the dollar before being converted into the legal currency of the beneficiary's account. These tedious conversion processes attract costs at every stage, making them expensive and time-consuming.
To solve this problem, Ripple said that financial institutions can connect directly with SCB. In turn, thanks to the multi-hop removal of bilateral relations, payments will be received and forwarded to beneficiary financial institutions without the need for double FX processes. Multi-hop will make the entire payment process transparent, cost-effective and efficient for financial institutions participating in the ASEAN region