## Cross-Border Digital Payment Systems: The Case of Singapore, Thailand, Malaysia, and Beyond

_IMF News, November 8, 2022_

## Source details

**Canonical URL:** [Cross-Border Digital Payment Systems: The Case of Singapore, Thailand, Malaysia, and Beyond](https://www.imf.org/en/news/articles/2022/11/08/sp110822-cross-border-digital-payment-systems)

## Other formats

- [Markdown version](/en/news/articles/2022/11/08/sp110822-cross-border-digital-payment-systems/index.md)
- [Structured JSON version](/en/news/articles/2022/11/08/sp110822-cross-border-digital-payment-systems/index.json)
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## Bibliographic details
- Published: November 8, 2022

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### Overview
- 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.

### Problems with current cross-border payments
- Heavy reliance on correspondent banking:
  - Banks use accounts in other banks in other jurisdictions to move money and make payments on clients’ behalf; smaller banks use larger banks.
  - This model is expensive: customers may pay large spreads on the exchange rate; fees compound as many intermediaries each get a cut.
  - Competition is decreasing: the number of correspondent banks globally has fallen by about a quarter over the last decade.
- Distributional harms:
  - Example: a migrant worker pays seven out of every $100 she sends back to her home country in fees, reducing funds for her family.
  - Small exporters retain less capital to grow their businesses and hire workers.

### Recent progress and near-term approaches
- G20 has prioritized improving cross-border payments.
- Country-level fast payment system connections:
  - Example: Singapore and Thailand have made quick progress by connecting fast payment systems, resulting in lower transaction costs for cross-border payments.
  - 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.
- Hub model:
  - A common hub where countries’ fast payment systems can connect may be more efficient.
  - BIS Innovation Hub’s Nexus project is advancing this direction.

### Promising long-term solutions and innovations
- Multilateral cross-border payment platforms combining CBDC with new technology:
  - Potential benefits:
    - Shorten transaction chains.
    - Improve security by making central bank money available for settlement.
    - Add functionalities such as centralized FX markets native to the platforms to reduce high currency exchange costs.
    - Automate financial contracts (e.g., FX auctions) using “smart contracts.”
    - Simplify compliance checks while preserving countries’ data sovereignty.
    - Increase trust and promote competition with private sector participation for innovation and public sector supervision.
- Design and policy considerations:
  - Requires much more than interoperable technology.
  - Must protect economic and financial stability while allowing innovation.
  - At the country level, authorities need to maintain control over:
    - monetary policy,
    - financial condition,
    - capital-account openness,
    - foreign-exchange regime.
  - Regional platforms should aim for interoperability to minimize fragmentation costs.
  - Ownership and governance questions need resolution.

### IMF role, partnerships, and actions
- 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.

### Key statements and figures (verbatim from source)
- "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"

*Source: Opening Remarks by DMD Bo Li, November 8, 2022.*

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## References

- [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)

_Source: https://www.imf.org/en/news/articles/2022/11/08/sp110822-cross-border-digital-payment-systems_