The Future of Cashless Payments in Southeast Asia

The Future of Cashless Payments in Southeast Asia

Central banks in Southeast Asia are working to improve the efficiency and transparency of cross-border payments, with the aim of expanding the availability of cross-border payment services and reducing associated costs.

Five central banks in Southeast Asia have signed a memorandum of understanding on regional cross-border payments at an event ahead of the G20 summit in Bali. The General Agreement on Payment Connectivity among ASEAN-5 Central Banks is a collaborative effort between the central banks of Indonesia, Malaysia, the Philippines, Singapore and Thailand. Its main objective is to strengthen and enhance cooperation in the area of payment connectivity. This agreement, which is the first among several ASEAN central banks, aims to improve cross-border payments in terms of speed, cost efficiency, transparency and security. 

Specifically, the agreement focuses on supporting faster, more affordable, transparent and secure cross-border payments, with a particular emphasis on the retail sector and its impact on small and medium-sized enterprises (SMEs). However, there is also potential for expansion into the wholesale sector. Specifically, the agreement covers a wide range of features, including the use of QR codes to facilitate payments. Each participating country has its own domestic QR code system, such as QRIS in Indonesia or DuitNow in Malaysia.

To implement this agreement, existing bilateral cooperation will be expanded through this regional payment connectivity cooperation to strengthen regional economic integration. For example, Malaysia already has bilateral payment networks with countries such as Thailand, Indonesia and Singapore. The recently announced Indonesia-Indonesia payment link uses QR codes as a means to facilitate seamless transactions. Currently, this payment link allows individuals traveling between the two countries to make online payments to merchants and purchase goods in physical stores. 

Bank Negara Malaysia (BNM) and the Bank of Thailand (BOT) have established a cross-border payment link that integrates the real-time retail payment systems of both countries, PromptPay in Thailand and DuitNow in Malaysia. This initiative enables seamless and instant cross-border payment services for consumers and merchants. In addition, BNM and Bank Indonesia (BI) launched a cross-border QR payment link between Malaysia and Indonesia, enabling individuals in both countries to make retail payments directly. Similarly, the cross-border QR code payment integration between Malaysia and Singapore allows customers to easily complete retail transactions by scanning DuitNow and NETS QR codes.

Thailand has also done the same with Singapore and Indonesia. Thailand's PromptPay and Singapore's PayNow have established a real-time payment link to facilitate cross-border remittances between the two countries, becoming the world's first real-time payment. Then, Bank of Thailand and Bank Indonesia have implemented a cross-border quick response (QR) payment link between Thailand and Indonesia.

On the other hand, The Philippines through the Bangko Sentral ng Pilipinas (BSP), has partnered with the Monetary Authority of Singapore (MAS) to enable interoperable payments between Singapore and the Philippines.

This bilateral cooperation is expected to evolve into regional cooperation in the future. The use of local currency bonds for cross-border collateral transactions offers benefits such as risk mitigation, lower borrowing costs for financial institutions, and increased market liquidity. Typically, cross-border payments suffer from issues such as slowness, high costs and potential risks. However, the use of local currency settlement in cross-border payments eliminates the need to convert currency into US dollars, resulting in increased efficiency and reduced costs.

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