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Ripple News: Multi-Hop to Save Costs and Time for SMEs in ASEAN Countries

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According to an official Ripple post, Thailand’s Siam Commercial Bank will be the first financial institution to pioneer Multi-hop, a new feature meant to eliminate inefficiencies and high fees associated with cross-border payment in the traditional banking sector. 

Multi-hop which operates straight from RippleNet will make it possible for SCB to settle frictionless payment on net on behalf of other financial institutions.  This way, there will be better management of liquidity because the feature eliminates the need of bilateral relationship which is prevalent in traditional banking set up. Multi-hop will not only save time and transaction latency but allow for payments to be received and forwarded without bilateral relationship saving costs and time for banks within the Association of South Eastern Asian Nations (ASEAN) region.

The inefficiencies and cost involved within the ASEAN region is the main reason why Ripple decided to pioneer Multi-hop with SCB. In this region, cross border payment is expensive and literally unaffordable for small and medium enterprises that need a cheap means of sending and receiving cash. A recent report by Ripple stated that SMEs employ up-to 60 percent in emerging countries. But it could be higher in ASEAN region where Ripple places a rough estimate of 70 percent.  Here, moving cash regionally involves the conversion of local fiat to reserve currency, the USD before being converted back to domestic fiat currency of the beneficiary account. This tedious conversion processes attract fees at every stage making it expensive and time consuming.

To solve this, Ripple said financial institutions can link directly with SCB. In turn, thanks to multi-hop removal of bilateral relationships, payouts will be received and forwarded to beneficiary financial institutions without the need of double FX processes. Multi-hop will make the whole payment process seamless, cheap and efficient for participating financial institutions within the ASEAN region

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