Asean payment connectivity to cut transaction costs

EIGHT Asean countries agreed on Asean Payment Connectivity, which aims to cut transaction fees for migrants, tourists and businesses, during the meeting of Asean Finance Ministers and Central Bank Governors in Chiang Rai last week.

Bank of Thailand (BOT) Governor Veerathai Santiprabhob and Perry Warjiyo, governor of Bank Indonesia (BI) signed the memorandum of understanding (MoU) on Cooperation in the Area of Payment Systems and Financial Innovation.

Veerathai and Bank of Laos governor Sonexay Sitphaxay also signed an MoU on Cooperation in the Areas of Financial Innovation and Payments Systems.

The MoU targets enhanced collaboration on financial innovations and payment services to promote more efficient and secured domestic and cross-border transactions as well as to promote the use of local currencies.

The two central banks are working together to develop interoperable QR Code for payments and real-time remittance to facilitate cross-border retail payment services between Laos and Thailand.

“Our financial institutions have been collaborating to offer cross-border QR payments to enable easy and convenient payments for Lao and Thai tourists, as well as for SMEs in both countries to receive payments in an efficient, convenient way. Progress was also achieved in the area of corporate funds transfers between the two countries using blockchain technology,” said a BOT statement.

The Thai central bank also agreed to cooperate with central banks in Cambodia, Malaysia Myanmar, Philippines and Singapore on financial connectivity.

Banks and non-bank operators in Asean have joined the bandwagon.

“Today, we have witnessed collaboration among banks, non-banks and card companies to develop cross-border payment services using modern technologies, ranging from interoperable QR Code, blockchain technology, Application Programming Interface [API], and card networks. These new services can serve the needs of different customer segments, improve efficiency of the regional financial system, facilitate business transactions and international trade, reduce the cost of service providers and customers, and enhance financial inclusion for a broad range of Asean population,” said Veerathai.

The cooperation will also cut the cost of exchange-rate risk and streamline financial transactions.

Currently, migrants who send money back to their hometowns face high service fee for remittances. For example, people in Thailand transferring US$500 (RM2,045) out of the country are charged a US$36.40 service fee while the fees in Singapore and Malaysia are US$16 and US$15.50 respectively.

U Kyaw Kyaw Maung, governor of Myanmar Central Bank, said migrant Myanmar workers, estimated to number 3 million in Thailand, would benefit from the remittance service provided by Krung Thai Bank and Myanmar-based Shwe Bank.

Ravi Menon, managing director of the Monetary Authority of Singapore, said that Thailand and Singapore will next year link Thai PromptPay and Singapore’s PayNow, which are payment systems that tie bank accounts with mobile phones, allowing customers to use mobile application for financial transactions. — The Nation/ANN