Ripple recently announced that they would be launching a new feature for RippleNet known as multi-hop payments. The feature was launched in conjunction with Siam Commercial Bank in Thailand. This effectively means that customers on RippleNet will have eliminated the need for a direct one-to-one connection to settle payments. The feature was pioneered to combat the inefficient management of global liquidity.
This is a prominent problem in the Association of South Eastern Asian Nations [ASEAN]. Due to liquidity drying up between the various local currencies in the area, countries in this region have to rely on conversions to USD for liquidity. This means that they have to process payments through multiple correspondent banks.
Various drawbacks of this method include having to pay two sets of Foreign Exchange fees, no support for low-value payments like those made by Small and Medium Enterprises.
The announcement by Ripple stated:
“Using multi-hop, SCB will be able to receive and forward on a payment without a bilateral relationship between the originator and beneficiary institutions”
This feature essentially allows various financial institutions to directly connect to the SCB, which allows for settlement and payment without having to go through an expensive process.
On the flipside of the feature being convenient, multi-hop payments have a higher risk of failure. This is due to the payment moving through a large number of correspondent banks, which create more points of failure. However, Ripple has found a way to solve this problem.
While Ripple has not mentioned how this is achieved, it seems to be done through the InterLedger Protocol. The protocol is a software suite designed to settle payments across ledgers. In a Ripple document, they spoke about a feature of the ILP which allows for the creation of conditional payments and then fulfills the conditions for the payment. This effectively reduces risk in multi-hop payments. According to Ripple:
“The Escrow feature makes the XRP Ledger ideal for bridging multi-hop payments using the Interledger Protocol, because it natively supports transfers that deliver XRP…and it executes those transfers within seconds of being presented with the matching fulfillment.”
Moreover, Ripple stated that all customers of RippleNet will be able to see “faster and cheaper payments” owing to the implementation of this feature. They also stated that this will drive a “seamless payments experience” in and out of ASEAN countries.
Dilip Rao, Ripple’s Global Head for Infrastructure Innovation, stated on the move:
“Milestone in the scaling of #RippleNet! Now ANY regional bank can act as a correspondent bank, connecting originators and beneficiaries with multiple intermediate legs, yet with full transparency of data and an atomic (single) settlement across all legs. Fees down, speed up!”
The post RippleNet gets an upgrade with multi-hop payments: Siam Commercial Bank first to test appeared first on AMBCrypto.
Source: AMBcrypto
Original Post: RippleNet gets an upgrade with multi-hop payments: Siam Commercial Bank first to test
