Central banks in Southeast Asia are working to enhance the efficiency and transparency of cross-border payments, with the aim of accelerating the supply of cross-border payment services and reducing the prices related to them.
Five central banks in Southeast Asia signed a memorandum of understanding on regional cross-border payments at a pre-G20 summit event in Bali. The General Agreement on Payment Connectivity amongst ASEAN-5 Central Banks is a three way partnership between the central banks of Indonesia, Malaysia, the Philippines, Singapore and Thailand. Its major goal is to strengthen and improve cooperation in the world of payment connectivity. The agreement, which is the primary amongst several ASEAN central banks, goals to enhance cross-border payments by way of speed, cost efficiency, transparency and security.
In particular, the agreement focuses on supporting faster, cheaper, transparent and secure cross-border payments, with a specific give attention to the retail sector and its impact on small and medium-sized enterprises (SMEs). However, there may be also potential for expansion within the wholesale sector. In particular, the agreement covers a wide selection of features, including the usage of QR codes to facilitate payments. Each participating country has its own national QR code system, comparable to QRIS in Indonesia or DuitNow in Malaysia.
To implement this agreement, existing bilateral cooperation might be expanded under the Regional Payment Connectivity Cooperation to strengthen regional economic integration. For example, Malaysia already has bilateral payment networks with countries comparable to Thailand, Indonesia and Singapore. The recently announced Indonesia-Indonesia payment link uses QR codes to facilitate seamless transactions. Currently, this payment link allows people traveling between the 2 countries to make online payments to merchants and buy goods in physical stores.
Bank Negara Malaysia (BNM) and the Bank of Thailand (BOT) have established a cross-border payment link that integrates the 2 countries’ real-time retail payment systems, PromptPay in Thailand and DuitNow in Malaysia. This initiative enables the seamless and immediate delivery of cross-border payment services to consumers and merchants. Additionally, BNM and Bank Indonesia (BI) have launched a cross-border QR payment link between Malaysia and Indonesia, enabling individuals in each countries to make retail payments directly. Similarly, cross-border QR code payment integration between Malaysia and Singapore enables customers to simply conduct retail transactions by scanning DuitNow and NETS QR codes.
Thailand did the identical with Singapore and Indonesia. Thailand’s PromptPay and Singapore’s PayNow have created a real-time payment link to facilitate cross-border money transfers between the 2 countries, becoming the world’s first real-time payment. Subsequently, the Bank of Thailand and the Bank of Indonesia implemented a cross-border quick response (QR) payment link between Thailand and Indonesia.
On the opposite 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 predicted to become regional cooperation in the longer term. The use of local currency bonds for cross-border hedging transactions offers advantages comparable to risk reduction, lower borrowing costs for financial institutions and increased market liquidity. Typically, cross-border payments are slow, high-cost and potentially dangerous. However, the usage of local currency settlements in cross-border payments eliminates the necessity to convert currency to US dollars, leading to increased efficiency and price reduction.
