How ASEAN Is Bridging Borders with Instant Payments

May 2024

Fintech & Payments

Michael Greenwood

Principal Analyst

Many countries have launched or are in the process of launching instant payment rails, which are transforming how payments are made and processed. However, one key limitation with national payment rails is that they can only facilitate payments domestically, meaning individuals and businesses typically have to use slower methods for cross-border transactions. In a world with increasingly international supply chains, international travel, and cross-border remittance payments, the need for fast and affordable cross-border transactions is only growing.

As such, it is important to learn from where concrete steps are being taken to address this challenge, such as Southeast Asia. These countries, most prominently Singapore, Malaysia, and Thailand, have already implemented domestic instant payment schemes which have seen strong adoption. The adoption of instant payments in these markets has gone hand in hand with the adoption of digital wallets. This is best illustrated in Thailand, where instant mobile wallet payments are facilitated by the PromptPay system, initiated by QR codes. This service has 77% of domestic consumer transactions being made by instant payments, according to Juniper Research data.

Volume of Transactions via PromptPay (m), 2019-2023

Source: Bank of Thailand

With the close economic ties of these countries facilitated through ASEAN (the Association of Southeast Asian Nations), the logical next step was to link the different domestic instant payment networks. The challenge in cross-border instant payments comes from needing a different connection to each additional payment rail that is connected. When connecting several different payment rails, this can lead to an overly complex system. 

These challenges were overcome utilising the ISO 20022 standard, which is designed to facilitate greater interoperability. This saw Thailand’s PromptPay connect to Singapore’s PayNow system in April 2021, followed by connections to Malaysia’s DuitNow system in June 2021. These connections allow users of one service to utilise it in one of these other countries. For example, a Thai user of PromptPay can use it as their payment method at merchants that accept PayNow transfers in Singapore. This has significantly simplified cross-border payments between these countries.

ASEAN Member Nations, 2024

Source: Kingdom of Cambodia, Ministry of Foreign Affairs & International Cooperation

Another scheme to promote cross-border instant payments in this region is Project Nexus. Project Nexus is run by the BIS (Bank of International Settlement), and looks to standardise the way in which domestic instant payment schemes are connected. This is done by removing the need to connect to each domestic payment rail individually – instead, all payment rails make a single connection to the Nexus platform, connecting them to all other members.

Juniper Research expects that these connections will not be limited to three countries, but expanded to include the other ASEAN nations. This would be in line with the stated aims of the DEFA (Digital Economy Framework Agreement) set out by ASEAN, which will be finalised in 2025. Steps in this direction are already being taken, with the Philippines launching its new instant payment scheme in April 2024, and Indonesia already having its BI-FAST system. In the coming years, as other ASEAN nations bring ISO 20022-compliant instant payment rails online, these systems will be interconnected; allowing for instant cross-border payments between these nations.

These connections will facilitate the use of digital wallets for cross-border payments, with tourism and remittance payments being major drivers from the consumer perspective. From a business perspective, instant payments are a less clear upgrade. Many difficulties remain, with factors such as changing exchange rates and regulatory differences between jurisdictions having a more significant impact.

It is these challenges for the B2B (Business-to-Business) payments space that present the greatest opportunities to PSPs (Payment Service Providers). By offering instant payment solutions with additional services that alleviate the pain points for cross-border B2B instant payments, they have the capability to capitalise on a significant emerging market. Southeast Asia is seeing healthy economic growth, leading to strong business growth, and cross-border B2B payment growth. By being able to offer a more streamlined cross-border instant payment service, they can ride this rising tide to significantly grow their revenue. Key additional services will be real-time currency conversion, ensuring that companies do not get caught out by changes in exchange rates, and compliance solutions that meet AML standards across the region, not just in the company’s domestic market.

For other regions seeking to achieve similar success, international cooperation is key. Having a supernational trade block is the perfect organisation to facilitate the co-operation of the different national payment schemes. Without this, it will come down to the direct cooperation of the payment schemes themselves. To make the integration easier, alignment on messaging standards is vital, and friction around currency conversion must be resolved.

Michael, a Research Analyst at Juniper Research, primarily conducts research on digital identity and payments markets. His recent reports include Digital Identity, B2B Payments, and Carrier Billing.