{
  "title": "Cross-Border Digital Payment Systems: The Case of Singapore, Thailand, Malaysia, and Beyond",
  "publication": "IMF News, November 8, 2022",
  "sourceUrl": "https://www.imf.org/en/news/articles/2022/11/08/sp110822-cross-border-digital-payment-systems",
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  "summary": "A revolution in digital technology and telecommunication has made an outsized impact on financial services and payments in the last three decades. We access our bank accounts from our phones, make instantaneous transfers, and buy goods and services online.",
  "publishDate": "2022-11-08",
  "sections": [
    {
      "heading": "Overview",
      "content": "- Opening Remarks by DMD Bo Li, November 8, 2022.\n- Theme: progress and challenges in cross-border digital payment systems amid a multi-decade digital revolution in financial services.\n- Core observation: domestic payments have become efficient, inexpensive, and more inclusive over the last three decades, while cross-border payments remain slow, expensive, and inconvenient."
    },
    {
      "heading": "Problems with current cross-border payments",
      "content": "- Heavy reliance on correspondent banking:\n  - Banks use accounts in other banks in other jurisdictions to move money and make payments on clients’ behalf; smaller banks use larger banks.\n  - This model is expensive: customers may pay large spreads on the exchange rate; fees compound as many intermediaries each get a cut.\n  - Competition is decreasing: the number of correspondent banks globally has fallen by about a quarter over the last decade.\n- Distributional harms:\n  - Example: a migrant worker pays seven out of every $100 she sends back to her home country in fees, reducing funds for her family.\n  - Small exporters retain less capital to grow their businesses and hire workers."
    },
    {
      "heading": "Recent progress and near-term approaches",
      "content": "- G20 has prioritized improving cross-border payments.\n- Country-level fast payment system connections:\n  - Example: Singapore and Thailand have made quick progress by connecting fast payment systems, resulting in lower transaction costs for cross-border payments.\n  - Limitations: each bilateral connection must be tailor-made, requiring time and significant effort; risk of a tangled “noodle bowl” of bilateral connections as participation grows.\n- Hub model:\n  - A common hub where countries’ fast payment systems can connect may be more efficient.\n  - BIS Innovation Hub’s Nexus project is advancing this direction."
    },
    {
      "heading": "Promising long-term solutions and innovations",
      "content": "- Multilateral cross-border payment platforms combining CBDC with new technology:\n  - Potential benefits:\n    - Shorten transaction chains.\n    - Improve security by making central bank money available for settlement.\n    - Add functionalities such as centralized FX markets native to the platforms to reduce high currency exchange costs.\n    - Automate financial contracts (e.g., FX auctions) using “smart contracts.”\n    - Simplify compliance checks while preserving countries’ data sovereignty.\n    - Increase trust and promote competition with private sector participation for innovation and public sector supervision.\n- Design and policy considerations:\n  - Requires much more than interoperable technology.\n  - Must protect economic and financial stability while allowing innovation.\n  - At the country level, authorities need to maintain control over:\n    - monetary policy,\n    - financial condition,\n    - capital-account openness,\n    - foreign-exchange regime.\n  - Regional platforms should aim for interoperability to minimize fragmentation costs.\n  - Ownership and governance questions need resolution."
    },
    {
      "heading": "IMF role, partnerships, and actions",
      "content": "- IMF staff have published a working paper on cross-border digital payments to stimulate further innovation.\n- IMF engagement emphasizes partnership with forward-thinking organizations such as the Monetary Authority of Singapore and BIS.\n- Rationale: no single institution has all the answers; collaboration and peer learning are essential.\n- Objective: shape a more efficient, secure payment system that lessens digital divides and benefits migrant workers, small businesses, major companies, and governments."
    },
    {
      "heading": "Key statements and figures (verbatim from source)",
      "content": "- \"last three decades\"\n- \"slow, expensive, and inconvenient\"\n- \"the number of correspondent banks globally has fallen by about a quarter over the last decade\"\n- \"a migrant worker pays seven out of every $100 she sends back to her home country in fees\"\n- \"Singapore and Thailand ... have made quick progress by connecting fast payment systems\"\n- \"noodle bowl\" (to describe tangled bilateral connections)\n- BIS Innovation Hub’s Nexus project\n- \"central bank digital currency (CBDC)\"\n- \"smart contracts\"\n\nSource: Opening Remarks by DMD Bo Li, November 8, 2022.\n\n---\n\n\n References\n\n- Peer-Learning Series on Digital Technologies and Digital Money in Asia and the Pacific\n- Bo Li\n- Malaysia and the IMF\n- Singapore and the IMF\n- Thailand and the IMF\n- Speeches\n- PRESS CENTER\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2022/11/08/sp110822-cross-border-digital-payment-systems"
    }
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    "Published: November 8, 2022",
    "Opening Remarks by DMD Bo Li, November 8, 2022.",
    "Theme: progress and challenges in cross-border digital payment systems amid a multi-decade digital revolution in financial services.",
    "Core observation: domestic payments have become efficient, inexpensive, and more inclusive over the last three decades, while cross-border payments remain slow, expensive, and inconvenient.",
    "Heavy reliance on correspondent banking:",
    "Distributional harms:",
    "G20 has prioritized improving cross-border payments.",
    "Country-level fast payment system connections:",
    "Hub model:",
    "Multilateral cross-border payment platforms combining CBDC with new technology:",
    "Design and policy considerations:",
    "IMF staff have published a working paper on cross-border digital payments to stimulate further innovation.",
    "IMF engagement emphasizes partnership with forward-thinking organizations such as the Monetary Authority of Singapore and BIS.",
    "Rationale: no single institution has all the answers; collaboration and peer learning are essential.",
    "Objective: shape a more efficient, secure payment system that lessens digital divides and benefits migrant workers, small businesses, major companies, and governments.",
    "\"last three decades\"",
    "\"slow, expensive, and inconvenient\"",
    "\"the number of correspondent banks globally has fallen by about a quarter over the last decade\"",
    "\"a migrant worker pays seven out of every $100 she sends back to her home country in fees\"",
    "\"Singapore and Thailand ... have made quick progress by connecting fast payment systems\"",
    "\"noodle bowl\" (to describe tangled bilateral connections)",
    "BIS Innovation Hub’s Nexus project",
    "\"central bank digital currency (CBDC)\"",
    "\"smart contracts\"",
    "[Peer-Learning Series on Digital Technologies and Digital Money in Asia and the Pacific](https://www.imf.org/en/News/Seminars/Conferences/2022/03/09/digital-technologies-and-digital-money-in-asia-and-the-pacific)",
    "[Bo Li](https://www.imf.org/en/About/senior-officials/Bios/bo-li)",
    "[Malaysia and the IMF](http://www.imf.org/external/country/MYS/index.htm)",
    "[Singapore and the IMF](http://www.imf.org/external/country/SGP/index.htm)",
    "[Thailand and the IMF](http://www.imf.org/external/country/THA/index.htm)",
    "[Speeches](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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