Residents in Singapore, Indonesia, Malaysia and Thailand can pay for goods and services in each other's countries using local currencies
A new regional cross-border payment system recently implemented by Southeast Asian nations could deepen the region's financial integration, bringing the ASEAN bloc closer to the goal of economic unity. Residents in Singapore, Indonesia, Malaysia and Thailand can now pay for goods and services in each other's countries using local currencies, which analysts expect will boost tourism, consumer spending and remittance flows. The Philippines is expected to join the program soon, while the ultimate goal, as expressed by leaders at the recent meeting of the Association of Southeast Asian Nations, is to expand to all ten member countries. Analysts say retail industries will particularly benefit amid an expected increase in consumer spending, which could in turn boost tourism, while regional connectivity is seen as vital to reduce the region's dependence on foreign currencies such as the dollar.
By connecting payment systems with a QR code, money can be sent from one digital wallet to another. These digital wallets effectively act as bank accounts, but can also be linked to official financial institutions. For example, Malaysian tourists in Singapore can make a payment in Malaysian ringgit coins to the Malaysian digital wallet when making a transaction. Fees and exchange rates will be determined by mutual agreement between the central banks themselves. At the moment, a similar regional system does not exist in other parts of the world, but down the road the Bank for International Settlements, based in Switzerland, hopes to connect retail payment systems around the world using QR codes and mobile phones, writes CNBC. Micro-enterprises as well as SMEs will emerge as winners from regional payment connectivity, experts say. According to the Asian Development Bank, such companies account for over 90% of businesses in Southeast Asia.
Central banks should address security and fraud issues, as well as take on the task of educating the public. to embrace the new payment system. This kind of concerted action will require strong political will from regional leaders, and it remains to be seen whether ASEAN members can come together to successfully implement such an ambitious undertaking.