As ASEAN chair, Indonesia advocates expanding regional payment connections inside the bloc. During the primary meeting of ASEAN central bank governors and Indonesia-led finance ministers in Bali, the country revealed that Vietnam will soon join the cross-border payments connectivity network, expanding membership from the present five member states to 6. The current network includes Indonesia, Malaysia, the Philippines, Singapore and Thailand, which have committed to connecting their QR code payment systems. Indonesia and Thailand are already linked, while Indonesia-Malaysia link trials have entered their final stages.
Bank of Indonesia Governor Perry Warjiyo stressed the necessity for member countries to develop a national fast payments system before establishing cross-border connections. Indonesia has its Indonesia Quick Response Standard (QRIS) and Bank Indonesia Quick Payment, while other ASEAN-5 countries even have their fast payment systems. As Vietnam is within the strategy of strengthening its fast payments system, it’s now ready to hitch the network. However, Brunei Darussalam, Laos and Cambodia are still developing their fast payments systems, although they’ve expressed interest in joining.
Project Nexus, led by the Bank for International Settlements (BIS), has successfully connected the payment systems of Singapore, Malaysia and the Eurosystem, giving hope to the interconnection plan. In the subsequent phase of the project, ASEAN-5 will work on connecting their payment systems. Bank of Indonesia Governor Perry Warjiyo noted that the network expansion is geared toward supporting economic recovery and meeting the needs of transactions and tourists across the ASEAN region. As more members join the network and strengthen multilateral connectivity, the main focus shall be on strengthening supervision, regulation, data security and cybersecurity.
The ultimate goal is to make cross-border payments more seamless and convenient, enabling individuals and businesses to simply transact across the ASEAN region. The network expansion is predicted to profit small and medium-sized enterprises (SMEs), that are key to the region’s economic growth. By connecting their payment systems, ASEAN member states can increase trade and investment amongst themselves and with other regions, contributing to the general development of the ASEAN economy.
According to a report by Fitch Solutions, the usage of QR code payments in ASEAN is predicted to grow rapidly in the approaching years, with the region forecast to experience the fastest growth on the earth. The report also notes that the increasing adoption of digital payments within the region is driven by aspects resembling rising smartphone penetration, government initiatives and a growing e-commerce sector. The Covid-19 pandemic has also accelerated the adoption of digital payments as consumers and businesses seek convenient and contactless payment options.
The development of cross-border payment connections inside the ASEAN bloc is an element of a broader trend of regional payment integration, through which countries seek to facilitate trade and investment and reduce the prices of cross-border transactions. For example, within the Asia-Pacific region, initiatives resembling ASEAN+3 (ASEAN plus China, Japan and South Korea) and the Asia Region Funds Passport (ARFP) aim to advertise cross-border investment and financial inclusion.
Overall, the expansion of the ASEAN cross-border payments network represents a positive development for the region’s economy and its integration into the worldwide economy. By making cross-border transactions easier and more efficient, the network can facilitate trade and investment, support SMEs and promote economic growth and development.
Bibliography”
- ASEAN Chairmanship. (2021). About ASEAN. Retrieved from https://asean.org/asean/about-asean/
- Bank for International Settlements. (2021). Nexus: towards a world payments network. Retrieved from https://www.bis.org/cpmi/publ/d202.htm
- Lee, Y. C. (2022, March 24). Vietnam will join ASEAN cross-border payment connectivity. Business Times. Retrieved from https://www.businesstimes.com.sg/banking-finance/vietnam-to-join-asean-cross-border-payment-connectivity
- Reuters. (2022, March 25). Vietnam will join ASEAN cross-border payment connectivity. Reuters. Retrieved from https://www.reuters.com/markets/us/vietnam-join-asean-cross-border-payment-connectivity-2022-03-25/
- Jakarta Post Office. (2022, March 25). ASEAN payments connectivity will expand with the addition of Vietnam: Bank Indonesia. Retrieved from https://www.thejakartapost.com/news/2022/03/25/asean-payment-connectivity-set-to-grow-with-vietnams-addition-bank-indonesia.html
