## 1. Payment Digitalization and Financial Inclusion

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---

### A. Introduction
- Digitalization reshapes payment infrastructure, enhancing efficiency and inclusiveness while introducing operational and cyber risks.
- Benefits:
  - Enables faster, cheaper, and more secure transfers, lowering frictions and supporting e-commerce and small enterprises.
  - Enhances tax compliance and transparency, strengthening public revenues.
  - Fosters financial inclusion by expanding access to financial services for underserved populations.
- Risks and challenges:
  - Operational and cyber risks increase with reliance on digital platforms.
  - Fragmentation from multiple providers raises interoperability concerns.
  - Concentration among dominant providers could pose systemic risks.
- Cross-border implications:
  - Improves efficiency of cross-border payments and increases international trade.
  - Services trade values are more closely associated with US dollar exchange rates; dominance of the US dollar and the euro in cross-border payments introduces exchange-rate-related vulnerabilities.
  - ASEAN policy attention is focusing on using local currencies for cross-border payments to reduce vulnerabilities.
- Regional frameworks:
  - G20 Roadmap for Enhancing Cross-border Payments addresses high costs, slow speeds, limited accessibility, and lack of transparency.
  - ASEAN initiatives include Regional Payment Connectivity (RPC) and ASEAN Local Currency Transaction Framework (LCTF).
- Thailand context:
  - Thailand leads ASEAN's transition to cashless and digital payments domestically and across borders.
  - Mobile phone ownership in ASEAN: over 80 percent.
  - E-money account ownership regionally: about 20 percent (World Bank Global Findex 2025 Database).
  - Thailand e-money account ownership: close to half of the adult population (World Bank Global Findex 2025 Database).
  - Thailand indicators:
    - Use of non-physical payments increased annually by more than 75 percent on average during 2019-24.
    - About 80 percent of adults in Thailand own financial accounts.
    - 55 percent own a debit card.
    - 50 percent have made digital payments.
  - PromptPay adoption: rapid (see Section B for bilateral and multilateral cross-border linkages progress).

### B. Digital Payments in ASEAN
- Private fintech funding and e-money growth:
  - Fintech funding to ASEAN surged since 2014 and peaked in 2021, then declined as financing costs rose.
  - Singapore is the key hub for private investment funding, followed by the Philippines and Indonesia.
  - E-money examples:
    - In Malaysia, total value of e-money payments accounted for more than 8 percent of annual GDP.
    - In Singapore, each person made about 300 transactions through e-money in 2024.
- Role of central banks and standards:
  - Central banks develop fast payment systems and establish QR payment standards to ensure interoperability and catalyze adoption.
  - Country approaches:
    - Thailand: Bank of Thailand launched PromptPay, a universal low-cost real-time payment system linking bank accounts to national IDs or mobile phone numbers; simplification boosted digital transactions and bypassed traditional credit card networks.
    - Indonesia: Bank Indonesia introduced QRIS as a single national QR standard to eliminate fragmentation and ensure interoperability.
    - Vietnam: State Bank of Vietnam supports VietQR but has not mandated nationwide use—more decentralized approach.
  - Shared objective: promote financial inclusion, enhance payment system efficiency, and reduce costs.
- Private sector innovation:
  - Private companies leverage infrastructures like PromptPay and QRIS to develop user-friendly mobile applications and integrate payments widely.
  - Examples:
    - In Thailand, applications allow instant fund transfers to any bank account using a mobile number via PromptPay.
    - In Indonesia, fintech and e-commerce companies integrated QRIS enabling single-standard QR payments.
- Domestic fast payments and QR growth:
  - Surge over past five years, especially 2019-24.
  - Thailand: average number of fast payment transactions through PromptPay rose more than eight-fold from below 40 per person per year to almost 350 during 2019-24.
  - QR payments remain a smaller share of fast payments but have high growth potential.
  - Philippines: QR payments increased by 467 percent in volume and 372 percent in value in 2024 compared with 2023.
- Cross-border payments in Asia:
  - Asia accounted for 32 percent of global cross-border payments in 2024 and is expected to account for 37 percent in 2032 (FXC Intelligence).
  - Total volume of cross-border payments in Asia expected to almost double from 12.8 billion in 2024 to 23.8 billion in 2032.
  - Remittance costs:
    - Average cost of remittances in East Asia and Pacific declined from 6.7 percent in 2021Q1 to 5.8 percent in 2025Q1 (World Bank Remittance Prices Worldwide database).
  - Speed: percentage of cross-border payments credited within one business day in Asia is far below most other regions.
- ASEAN bilateral cross-border payment linkages:
  - Two types:
    - QR payment connectivity: travelers make real-time merchant payments in another country by scanning a QR code.
    - Fund transfer connectivity: instant remittances and fund transfers across borders using simple identifiers like mobile numbers or national IDs.
  - Thailand milestones:
    - First QR payment linkage with Japan in 2018, later with eight other economies.
    - April 2021: Singapore-Thailand established the first cross-border fund transfer connectivity.
  - Other linkages:
    - Singapore established cross-border fund transfer connectivity with India and Malaysia.
    - Philippines planning cooperation with Japan, Malaysia, and Singapore.
- Growth in cross-border QR payments:
  - QR cross-border payments small in value and volume but surged in growth.
  - 2024 examples:
    - Thailand: QR payments increased by more than 300 percent compared with 2023.
    - Malaysia: QR payments increased by 550 percent compared with 2023.
  - Tourism context:
    - Intra-ASEAN tourists accounted for 42 percent of total visitors in 2023, up from 36 percent in 2019.
    - Tourism accounts for 8 percent of the region's GDP and 12 percent of employment in 2023.
- Financial inclusion and SMEs:
  - Digital payments catalyze financial inclusion and support SME development.
  - Bank of Thailand survey: 96 percent of SMEs had adopted digital payments, accounting for over two-thirds of their payment value.
  - Benefits for SMEs:
    - Improved business efficiency through faster payment processing and reduced costs.
    - Digital payment footprints help financial institutions assess creditworthiness for SMEs lacking traditional credit history or collateral.
    - Cross-border linkages (e.g., PromptPay-PayNow between Thailand and Singapore) enable SMEs to sell abroad and receive instant, low-cost payments without complex international banking procedures.
- Risks: financial crime and system fragmentation:
  - Rapid adoption increased financial crime and money laundering risks, especially in cross-border transactions exploiting regulatory inconsistencies and speed of instant payments.
  - Typical threats: micro-structuring, identity theft, mule accounts, scam centers originating from high-risk countries.
  - Fragmentation from multiple bilateral linkages complicates interoperability and is resource-consuming to scale.
- Multilateral initiative — Project Nexus:
  - Collaboration among BIS Innovation Hub, Bank of Thailand, Bank Negara Malaysia, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore, and Reserve Bank of India.
  - Hub-and-spoke model connects multiple domestic fast payment systems through a single central hub, reducing infrastructure complexity compared with bilateral linkages.
  - Proof of concept completed in 2022; comprehensive blueprint announced in July 2024.
  - Incorporation of Nexus Global Payments in Singapore marks transition toward operationalization, aiming to go-live by 2027.

### Many ASEAN central banks are also exploring central bank digital currencies (CBDCs)
- Overview:
  - Following Singapore's lead in 2016, a majority of ASEAN countries have launched CBDC research over the past decade.
  - Since 2020, several have moved beyond research to launch experiments and pilots.
  - While no ASEAN country has yet officially launched CBDC for public use, most projects have considered cross-border payments as a key use case.
  - Among ASEAN countries, Singapore and Thailand are currently the most advanced in their development stage; other countries remain in preparation, proof-of-concept, prototype, or earlier exploratory stages.
  - Timeline/status data sourced from central banks; data as of Jan 14, 2026.
- Project mBridge (multilateral wholesale CBDC initiative):
  - Participants: Bank of Thailand, Central Bank of the United Arab Emirates, Digital Currency Institute of the People's Bank of China, Saudi Central Bank, Hong Kong Monetary Authority.
  - Pilot details:
    - A six-week pilot conducted in 2022.
    - Involved 20 commercial banks across four jurisdictions.
    - Successfully executed over 160 real-value transactions.
    - Demonstrated capability for real-time, peer-to-peer payments and foreign exchange transactions.
  - Development status:
    - Reached Minimum Viable Product (MVP) stage in mid-2024.
    - Ongoing development and enhancements continue while participating jurisdictions conduct real-value transactions on the mBridge platform, subject to their own condition and preparedness.
  - Project information from BOT; data as of Jan 14, 2026.

### Empirical analysis: Case of Thailand — context and payment patterns
- QR payments are still a small portion of total cross-border payments in Thailand but have shown significant growth.
- Among inbound cross-border payments to Thailand:
  - The share of cross-border ATM withdrawals has been declining and remains lower compared with the pre-pandemic level.
  - Credit card and debit card payments, on average, account for about 60 percent of total payments; the remainder are digital payments, including e-money and QR payments through bilateral fast payment linkages.
- Example growth: inbound payments through all seven QR linkages in 2024 were about five times that in 2023.
- Potential drivers (correlations and descriptive findings):
  - Cross-border QR payments are positively correlated with:
    - Tourism receipts from each partner economy.
    - Commercial bank transfer fees (higher traditional transfer costs associated with higher QR transactions).
    - Number of banks participating in each bilateral linkage.
    - Geographic distance: economies further away from Thailand seem to have higher QR transactions in Thailand (described qualitatively).
  - Bank transfer fee measured for an amount equivalent to USD 500.

### Econometric model: dataset and specification
- Dataset:
  - Source: Bank of Thailand.
  - Coverage: payments from seven economies (Cambodia, Hong Kong SAR, Indonesia, Laos, Malaysia, Singapore, Vietnam) to Thailand.
  - Period: 2020-2024 at monthly aggregate level.
  - Observations: 60 months, total of 420 observations (both by volume and value).
- Model explanatory variables:
  - FX volatility (FX_volit): volatility of local currency vs US dollar and versus Thai Baht.
  - Monthly depreciation (FX_git): local currency depreciation vs US dollar and Thai Baht.
  - Flightit: number of flights as proxy for tourists visiting Thailand.
  - Monthit: number of months the linkage has been established.
  - Financial inclusiveness: number of commercial bank branches (Commer_bankiT) and number of credit cards (Credit_cardiT).
  - Macroeconomic controls (CiT): GDP and CPI from IMF WEO.
- Model form:
  - QRit = β1 Monthit + β2 flightit + β3 FX_volit + β4 FX_git + β5 Commer_bankiT + β6 Credit_cardiT + CiT + εit

### Econometric findings (selected coefficients and fit statistics)
- Sample: N = 420; R^2 reported across specifications.
- Key estimated coefficients (from Table 2):
  - Local currency-USD volatility:
    - Log(value) columns: 82.43***; 35.06*; 56.25**.
    - Log(volume) columns: 7.168; 3.118; 19.26*.
  - Local currency-THB volatility:
    - Log(value) columns: 0.852; 2.939; 5.345.
    - Log(volume) columns: 2.356; 0.422; 2.587.
  - Local currency-USD depreciation:
    - Log(value) columns: -0.264***; -0.317***; -0.208**.
    - Log(volume) columns: -0.126**; -0.215***; -0.133**.
  - Local currency-THB depreciation:
    - Log(value) columns: -0.142; -0.160; -0.179*.
    - Log(volume) columns: -0.132**; -0.107*; -0.129**.
  - Number of commercial bank branches:
    - Log(value) columns: 0.00653; -1.966***; -1.615***.
    - Log(volume) columns: -0.0159; -0.977***; -0.771***.
  - Number of credit cards:
    - Log(value) columns: -0.182***; 0.173; 0.217.
    - Log(volume) columns: -0.0989***; -0.358***; -0.292***.
  - Month of implementation:
    - Log(value) columns: 0.111***; 0.240***; 0.0691*.
    - Log(volume) columns: 0.0442**; 0.186***; 0.0689***.
  - Log(number of flight):
    - Log(value) columns: 0.961***; 1.432***; 1.062***.
    - Log(volume) columns: 0.478***; 0.806***; 0.576***.
  - Constant (C) examples: 4.936***; -20.71; -14.43; 1.398*; -0.346; -0.614.
  - R^2 across specifications: 0.76; 0.77; 0.80; 0.81; 0.78; 0.83.
- Interpretation highlights:
  - Higher local currency-USD volatility is associated with higher cross-border QR payment values (statistically significant in multiple specifications).
  - Local currency-THB volatility does not appear to affect cross-border QR payments meaningfully.
  - Local currency depreciation (vs USD and THB) is associated with lower QR payments (values and volumes).
  - Negative coefficients on number of commercial bank branches and number of credit cards suggest QR payments may substitute for traditional banking and card payments where access is limited.
- Robustness: results remain robust when currency depreciations are excluded and when volatilities against the USD and THB are included separately.

### Conclusions and policy discussion
- Progress and challenges:
  - ASEAN countries have made significant progress in domestic and cross-border digital payments, aligned with global/regional initiatives and supported by regulators and private sector innovation.
  - The current web of bilateral cross-border arrangements is not scalable; multilateral approaches are being actively explored to enhance efficiency, interoperability, and reduce complexity.
- Leveraging digital payment data for financial inclusion and SME support:
  - Thailand initiatives include:
    - "Your Data" project to give customers control over their data for better financial services access.
    - Establishment of National Credit Guarantee Agency (NaCGA) to overhaul credit guarantees by assessing borrower credit risk using financial and non-financial data.
    - Virtual banks expected to use alternative data for underserved groups’ creditworthiness assessment.
  - Authorities should encourage SMEs to engage in regional trade and utilize existing digital cross-border payment arrangements via awareness campaigns and incentives.
- Oversight, harmonization, and consumer protection:
  - Implement robust oversight and reporting mechanisms with risk-based AML/CFT measures, including simplified measures in lower-risk scenarios to promote financial inclusion.
  - Push for greater harmonization of data protection laws across ASEAN to address divergence in legal and regulatory frameworks.
  - Enhance collaboration between authorities and financial institutions for digital/financial literacy, cybersecurity, fraud prevention, and comprehensive customer protection.
  - Develop a dedicated framework for cross-border supervisory, law enforcement, and oversight coordination to facilitate rapid information sharing and combat financial crime.
- Policy implications from empirical analysis:
  - Advancing regional payment connectivity and increasing local currency usage can strengthen financial resilience and reduce vulnerabilities to external shocks.
  - Messaging on low-cost, real-time local currency settlement can position cross-border QR payments as a tool for financial resilience, especially during local currency volatility.
  - Encourage broader participation from banks and financial institutions to expand reach, particularly to unbanked and underbanked populations.

*Source: sipea2026013 - 1. Payment Digitalization and Financial Inclusion (IMF Selected Issues Paper), January 26, 2026.*

### 1. Payment Digitalization and Financial Inclusion _______________________________________ 3

### 1. Payment Digitalization and Financial Inclusion

### A. Introduction
- Digitalization reshapes payment infrastructure, enhancing efficiency and inclusiveness while introducing operational and cyber risks.
- Digital payments enable faster, cheaper, and more secure transfers, lowering frictions and supporting e-commerce and small enterprises (Patnam and Yao, 2020).
- Benefits cited:
  - Enhances tax compliance and transparency, strengthening public revenues.
  - Fosters financial inclusion by expanding access to financial services for underserved populations (Demirgüç-Kunt et al., 2022).
- Risks and challenges:
  - Operational and cyber risks increase with reliance on digital platforms.
  - Fragmentation from multiple providers raises interoperability concerns.
  - Concentration among dominant providers could pose systemic risks (Copestake et al., 2025).
- Cross-border implications:
  - Digitalization improves efficiency of cross-border payments (He, 2021) and increases international trade (Cortes et al., 2024).
  - Services trade values are more closely associated with US dollar exchange rates; dominance of the US dollar and the euro in cross-border payments introduces exchange-rate-related vulnerabilities (Perez-Saiz et al., 2023; Li and Meleshchuk, 2024).
  - Policy attention in ASEAN is focusing on using local currencies for cross-border payments to reduce vulnerabilities.
- Regional frameworks:
  - G20 Roadmap for Enhancing Cross-border Payments addresses high costs, slow speeds, limited accessibility, and lack of transparency.
  - ASEAN initiatives: Regional Payment Connectivity (RPC) to link national payment systems; ASEAN Local Currency Transaction Framework (LCTF) to promote local currency cross-border transactions.
- Thailand context:
  - Thailand leads ASEAN's transition to cashless and digital payments domestically and across borders.
  - Mobile phone ownership in ASEAN: over 80 percent; e-money account ownership about 20 percent regionally (World Bank Global Findex 2025 Database).
  - Thailand: close to half of the adult population owns an e-money account (World Bank Global Findex 2025 Database).
  - Thailand indicators:
    - Use of non-physical payments increased annually by more than 75 percent on average during 2019-24.
    - About 80 percent of adults in Thailand own financial accounts.
    - 55 percent own a debit card.
    - 50 percent have made digital payments.
  - PromptPay adoption: rapid—see Section B for bilateral and multilateral cross-border linkages progress.
- Paper structure:
  - Section B: overview and key developments of ASEAN digital payments and risks.
  - Section C: explores drivers of local currency cross-border Quick Response (QR) payments in Thailand.
  - Section D: policy considerations.

### B. Digital Payments in ASEAN
- Private fintech funding and e-money growth:
  - Fintech funding to ASEAN surged since 2014 and peaked in 2021, then declined as financing costs rose.
  - Singapore is the key hub for private investment funding, followed by the Philippines and Indonesia.
  - E-money payments examples:
    - In Malaysia, total value of e-money payments accounted for more than 8 percent of annual GDP.
    - In Singapore, each person made about 300 transactions through e-money in 2024.
- Role of central banks and standards:
  - Central banks develop fast payment systems and establish QR payment standards to ensure interoperability and catalyze adoption.
  - Country approaches:
    - Thailand: Bank of Thailand launched PromptPay, a universal low-cost real-time payment system linking bank accounts to national IDs or mobile phone numbers; simplification boosted digital transactions and bypassed traditional credit card networks.
    - Indonesia: Bank Indonesia introduced QRIS as a single national QR standard to eliminate fragmentation and ensure interoperability.
    - Vietnam: State Bank of Vietnam supports VietQR but has not mandated nationwide use—more decentralized approach.
  - Outcome: shared objective—promote financial inclusion, enhance payment system efficiency, and reduce costs.
- Private sector innovation:
  - Private companies leverage infrastructures like PromptPay and QRIS to develop user-friendly mobile applications and integrate payments widely.
  - Examples:
    - In Thailand, applications allow instant fund transfers to any bank account using a mobile number via PromptPay.
    - In Indonesia, fintech and e-commerce companies integrated QRIS enabling single-standard QR payments.
- Domestic fast payments and QR growth:
  - Surge over past five years, especially 2019-24.
  - Thailand: average number of fast payment transactions through PromptPay rose more than eight-fold from below 40 per person per year to almost 350 during 2019-24.
  - QR payments remain a smaller share of fast payments but have high growth potential.
  - Philippines: QR payments increased by 467 percent in volume and 372 percent in value in 2024 compared with 2023.
- Cross-border payments in Asia:
  - Asia accounted for 32 percent of global cross-border payments in 2024 and is expected to account for 37 percent in 2032 (FXC Intelligence).
  - Total volume of cross-border payments in Asia expected to almost double from 12.8 billion in 2024 to 23.8 billion in 2032.
  - Remittance costs:
    - Average cost of remittances in East Asia and Pacific declined from 6.7 percent in 2021Q1 to 5.8 percent in 2025Q1 (World Bank Remittance Prices Worldwide database), driven largely by low cost of digital payments.
  - Speed: percentage of cross-border payments credited within one business day in Asia is far below most other regions (FSB, 2021; Freischlad, 2025), likely due to reliance on multiple correspondent banks, intermediaries, and compliance checks.
- ASEAN bilateral cross-border payment linkages:
  - Two types of linkages:
    - QR payment connectivity: allows travelers to make real-time merchant payments in another country by scanning a QR code.
    - Fund transfer connectivity: facilitates instant remittances and fund transfers across borders using simple identifiers like mobile numbers or national IDs.
  - Thailand milestones:
    - First QR payment linkage with Japan in 2018, later with eight other economies.
    - April 2021: Singapore-Thailand established the first cross-border fund transfer connectivity.
  - Other linkages:
    - Singapore established cross-border fund transfer connectivity with India and Malaysia.
    - Philippines planning cooperation with Japan, Malaysia, and Singapore in coming years.
- Growth in cross-border QR payments:
  - QR cross-border payments small in value and volume but surged in growth.
  - 2024 examples:
    - Thailand: QR payments increased by more than 300 percent compared with 2023.
    - Malaysia: QR payments increased by 550 percent compared with 2023.
  - Tourism context:
    - Intra-ASEAN tourists accounted for 42 percent of total visitors in 2023, up from 36 percent in 2019.
    - Tourism accounts for 8 percent of the region's GDP and 12 percent of employment in 2023.
- Financial inclusion and SMEs:
  - Digital payments catalyze financial inclusion and support SME development.
  - Bank of Thailand survey: 96 percent of SMEs had adopted digital payments, accounting for over two-thirds of their payment value.
  - Benefits for SMEs:
    - Improved business efficiency through faster payment processing and reduced costs.
    - Digital payment footprints (sales history, cash flow patterns) help financial institutions assess creditworthiness for SMEs lacking traditional credit history or collateral.
    - Cross-border linkages (e.g., PromptPay-PayNow between Thailand and Singapore) enable SMEs to sell abroad and receive instant, low-cost payments without complex international banking procedures.
- Risks: financial crime and system fragmentation:
  - Rapid adoption increased financial crime and money laundering risks, especially in cross-border transactions exploiting regulatory inconsistencies and speed of instant payments.
  - Typical threats: micro-structuring, identity theft, mule accounts, scam centers originating from high-risk countries.
  - Fragmentation from multiple bilateral linkages complicates interoperability and is resource-consuming to scale.
- Multilateral initiative — Project Nexus:
  - Collaboration among BIS Innovation Hub, Bank of Thailand, Bank Negara Malaysia, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore, and Reserve Bank of India.
  - Uses a hub-and-spoke model to connect multiple domestic fast payment systems through a single central hub, reducing infrastructure complexity compared with bilateral linkages.
  - Proof of concept completed in 2022; comprehensive blueprint announced in July 2024.
  - Incorporation of Nexus Global Payments in Singapore marks a transition toward operationalization, aiming to go-live by 2027.

*Source: sipea2026013 - 1. Payment Digitalization and Financial Inclusion (IMF Selected Issues Paper), January 26, 2026.*

### 17.      Many ASEAN central banks are also exploring central bank digital currencies (CBDCs)

### 17.      Many ASEAN central banks are also exploring central bank digital currencies (CBDCs)

### Overview of CBDC developments in ASEAN
- Following Singapore's lead in 2016, a majority of ASEAN countries have launched their own CBDC research over the past decade.
- Since 2020, several have moved beyond research to launch experiments and pilots.
- While no ASEAN country has yet officially launched CBDC for public use, most projects have considered cross-border payments as a key use case.
- Among ASEAN countries, Singapore and Thailand are currently the most advanced in their development stage; other countries remain in preparation, proof-of-concept, prototype, or earlier exploratory stages.
- Note: timeline/status data sourced from central banks; data as of Jan 14, 2026.

### Project mBridge (multilateral wholesale CBDC initiative)
- Participants: Bank of Thailand, Central Bank of the United Arab Emirates, Digital Currency Institute of the People's Bank of China, Saudi Central Bank, Hong Kong Monetary Authority.
- Pilot details:
  - A six-week pilot conducted in 2022.
  - Involved 20 commercial banks across four jurisdictions.
  - Successfully executed over 160 real-value transactions.
  - Demonstrated capability for real-time, peer-to-peer payments and foreign exchange transactions.
- Development status:
  - Reached Minimum Viable Product (MVP) stage in mid-2024.
  - Ongoing development and enhancements continue while participating jurisdictions conduct real-value transactions on the mBridge platform, subject to their own condition and preparedness.
- Note: project information from BOT; data as of Jan 14, 2026.

### Empirical analysis: Case of Thailand — context and payment patterns
- QR payments are still a small portion of total cross-border payments in Thailand but have shown significant growth.
- Among inbound cross-border payments to Thailand:
  - The share of cross-border ATM withdrawals has been declining and remains lower compared with the pre-pandemic level.
  - Credit card and debit card payments, on average, account for about 60 percent of total payments; the remainder are digital payments, including e-money and QR payments through bilateral fast payment linkages.
- Example growth: inbound payments through all seven QR linkages in 2024 were about five times that in 2023.

### Potential drivers of cross-border QR payments (correlations and descriptive findings)
- Cross-border QR payments are positively correlated with:
  - Tourism receipts from each partner economy.
  - Commercial bank transfer fees (higher traditional transfer costs associated with higher QR transactions).
  - Number of banks participating in each bilateral linkage (linkages with more participating banks have higher QR transactions).
  - Geographic distance: economies further away from Thailand seem to have higher QR transactions in Thailand (relationship described qualitatively; not quantified econometrically due to data limitations).
- Note: bank transfer fee measured for an amount equivalent to USD 500.

### Econometric model: dataset and specification
- Dataset:
  - Source: Bank of Thailand.
  - Coverage: payments from seven economies (Cambodia, Hong Kong SAR, Indonesia, Laos, Malaysia, Singapore, Vietnam) to Thailand.
  - Period: 2020-2024 at monthly aggregate level.
  - Observations: 60 months, total of 420 observations (both by volume and value).
- Model explanatory variables include:
  - FX volatility (FX_volit): volatility of local currency vs US dollar and versus Thai Baht.
  - Monthly depreciation (FX_git): local currency depreciation vs US dollar and Thai Baht.
  - Flightit: number of flights as proxy for tourists visiting Thailand.
  - Monthit: number of months the linkage has been established.
  - Financial inclusiveness: number of commercial bank branches (Commer_bankiT) and number of credit cards (Credit_cardiT).
  - Macroeconomic controls (CiT): GDP and CPI from IMF WEO.
- Model form:
  - QRit = β1 Monthit + β2 flightit + β3 FX_volit + β4 FX_git + β5 Commer_bankiT + β6 Credit_cardiT + CiT + εit

### Econometric findings (selected coefficients and fit statistics)
- Sample: N = 420; R^2 reported across specifications.
- Key estimated coefficients (from Table 2; standard errors and significance noted in the source):
  - Local currency-USD volatility:
    - Log(value) columns: 82.43***; 35.06*; 56.25**.
    - Log(volume) columns: 7.168; 3.118; 19.26*.
  - Local currency-THB volatility:
    - Log(value) columns: 0.852; 2.939; 5.345.
    - Log(volume) columns: 2.356; 0.422; 2.587.
  - Local currency-USD depreciation:
    - Log(value) columns: -0.264***; -0.317***; -0.208**.
    - Log(volume) columns: -0.126**; -0.215***; -0.133**.
  - Local currency-THB depreciation:
    - Log(value) columns: -0.142; -0.160; -0.179*.
    - Log(volume) columns: -0.132**; -0.107*; -0.129**.
  - Number of commercial bank branches:
    - Log(value) columns: 0.00653; -1.966***; -1.615***.
    - Log(volume) columns: -0.0159; -0.977***; -0.771***.
  - Number of credit cards:
    - Log(value) columns: -0.182***; 0.173; 0.217.
    - Log(volume) columns: -0.0989***; -0.358***; -0.292***.
  - Month of implementation:
    - Log(value) columns: 0.111***; 0.240***; 0.0691*.
    - Log(volume) columns: 0.0442**; 0.186***; 0.0689***.
  - Log(number of flight):
    - Log(value) columns: 0.961***; 1.432***; 1.062***.
    - Log(volume) columns: 0.478***; 0.806***; 0.576***.
  - Constant (C) examples: 4.936***; -20.71; -14.43; 1.398*; -0.346; -0.614.
  - R^2 across specifications: 0.76; 0.77; 0.80; 0.81; 0.78; 0.83.
- Interpretation highlights:
  - Higher local currency-USD volatility is associated with higher cross-border QR payment values (statistically significant in multiple specifications).
  - Local currency-THB volatility does not appear to affect cross-border QR payments meaningfully.
  - Local currency depreciation (vs USD and THB) is associated with lower QR payments (values and volumes).
  - Negative coefficients on number of commercial bank branches and number of credit cards suggest QR payments may substitute for traditional banking and card payments where access is limited.
- Robustness: results remain robust when currency depreciations are excluded and when volatilities against the USD and THB are included separately.

### Conclusions and policy discussion
- Progress and challenges:
  - ASEAN countries have made significant progress in domestic and cross-border digital payments, aligned with global/regional initiatives and supported by regulators and private sector innovation.
  - The current web of bilateral cross-border arrangements is not scalable; multilateral approaches are being actively explored to enhance efficiency, interoperability, and reduce complexity.
- Leveraging digital payment data for financial inclusion and SME support:
  - Thailand initiatives include:
    - "Your Data" project to give customers control over their data for better financial services access.
    - Establishment of National Credit Guarantee Agency (NaCGA) to overhaul credit guarantees by assessing borrower credit risk using financial and non-financial data.
    - Virtual banks expected to use alternative data for underserved groups’ creditworthiness assessment.
  - Authorities should encourage SMEs to engage in regional trade and utilize existing digital cross-border payment arrangements via awareness campaigns and incentives.
- Oversight, harmonization, and consumer protection:
  - Implement robust oversight and reporting mechanisms with risk-based AML/CFT measures, including simplified measures in lower-risk scenarios to promote financial inclusion.
  - Push for greater harmonization of data protection laws across ASEAN to address divergence in legal and regulatory frameworks.
  - Enhance collaboration between authorities and financial institutions for digital/financial literacy, cybersecurity, fraud prevention, and comprehensive customer protection.
  - Develop a dedicated framework for cross-border supervisory, law enforcement, and oversight coordination to facilitate rapid information sharing and combat financial crime.
- Policy implications from empirical analysis:
  - Advancing regional payment connectivity and increasing local currency usage can strengthen financial resilience and reduce vulnerabilities to external shocks.
  - Messaging on low-cost, real-time local currency settlement can position cross-border QR payments as a tool for financial resilience, especially during local currency volatility.
  - Encourage broader participation from banks and financial institutions to expand reach, particularly to unbanked and underbanked populations.

*Source: IMF staff analysis in "Many ASEAN central banks are also exploring central bank digital currencies (CBDCs)"; data and figures as reported in the chapter (data as of Jan 14, 2026).*

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_Source: https://www.imf.org/-/media/files/publications/selected-issues-papers/2026/english/sipea2026013.pdf_