BNM: Efficient Cross-Border Payment Services Crucial For Malaysia

Alex Cheong Pui Yin

15th July 2022 - 4 min read

Bank Negara Malaysia (BNM) governor, Tan Sri Nor Shamsiah Mohd Yunus has reiterated the importance of efficient cross-border payment services for Malaysia as a small and highly open economy. This is so that the nation can conduct trade and commerce with other countries conveniently and effectively.

As such, Tan Sri Nor Shamsiah said that BNM is currently making various endeavours to address this need, including linking DuitNow – Malaysia’s real-time payment service – with ASEAN neighbours. “This is a no brainer. Within Malaysia, DuitNow has enabled millions of individuals and businesses to transfer money instantly and seamlessly. So imagine if we could do the same for the whole region to make cross-border payments cheaper, faster, more transparent and accessible to all 600 million plus of us in the region. The economic impact can be significant,” she said.

The governor also said that given how highly integrated ASEAN economies are – with intra-ASEAN trade making up the largest share of total trade in the ASEAN region – cross-border payments can greatly help people and businesses in trade and travel. The 10 million people in ASEAN – or more – who are residing or working in other countries within the region will also benefit from it.

At present, Malaysia has successfully enabled cross-border QR payments with Thailand and Indonesia, and are seeking to expand the services to include peer-to-peer (P2P) transfers as well. Efforts are also being made to pursue similar outcomes with Singapore and the Philippines.

But Tan Sri Nor Shamsiah also said that Malaysia shouldn’t stop at just ASEAN countries. “Our efforts to set up bilateral connections for payment system in ASEAN is important, but we also need to start thinking about how to go about it more efficiently at the regional and global level. That is why we are participating in the Project Nexus proof-of-concept to test the feasibility of establishing a more scalable, multilateral network of fast payment system,” she said, adding that Malaysia is also involved in Project Dunbar.

For context, Project Nexus is an exploratory endeavour that seeks to determine the possibility of linking real-time payment systems between Malaysia, Singapore, and the euro area (19 countries that use the Euro currency). Meanwhile, Project Dunbar is an international collaboration between BNM and the central banks of Australia, Singapore, and South Africa, as well as the Bank of International Settlements (BIS) Innovation Hub. Among other things, it sought to prove the possibility of using different central digital bank currencies (CBDCs) for direct cross-border transactions on a shared platform.

On top of all these efforts, Tan Sri Nor Shamsiah stated that BNM is also implementing an industry-wide migration to ISO 20022 messaging standards to facilitate seamless cross-border payments and improve banks’ services. Briefly, ISO 20022 is an open global standard for the exchange of financial information, allowing for the provision of more consistent, detailed, and structured data that can be utilised for all financial business transactions. Banks can use these data to improve their risk management procedure and offer more value-added services.

That said, Tan Sri Nor Shamsiah also admits that these efforts and ambitions come with its own set of challenges as well – amplified by the involvement of multiple players and entities. Some key challenges that BNM expects to run into include having to identify an appropriate governance and risk management framework, as well as ensuring the long-term viability of the cross-border payment infrastructure implemented.

The governor further stressed that she has “no silver bullet solutions” for these challenges, but it is crucial for BNM to abide by two principles as it navigates its way through. Specifically, the central bank must establish a clear value proposition to all stakeholders involved, and foster strong public-private sector partnerships so that the industry can drive cross-border payment initiatives.

“For us in BNM, we have found the setting-up of Project Steering Committees in each cross-border payment initiative that we are participating in as being useful in fostering strategic alignment and ensuring timely resolution of issues to drive the project forward. Such arrangements also provide an avenue to ensure that any initiatives are underpinned by an appropriate governance and risk management framework that adequately manages risk in both jurisdictions,” Tan Sri Nor Shamsiah emphasised.

(Source: The Edge Markets)

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Alex Cheong Pui Yin

Previously covered recruitment-related stories and had a short stint as a copywriter for the property industry. She subsequently developed an interest in investment and robo-advisors.

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