Singapore makes leap in cross-border payment arrangement with Thailand

Singapore

SINGAPORE is leading the charge on cross-border payments and settlements, with several trail-blazing moves aimed at solving the perennial issues of speed and cost.

From mid-2021, users of Singapore's PayNow and Thailand's equivalent PromptPay will be able to send money instantly and securely from Singapore to Thailand and vice-versa using just their mobile phone numbers, at "competitive rates", said Ravi Menon, managing director of the Monetary Authority of Singapore (MAS).

This linkage between the two countries' national faster-payment systems will be the first in the world, he noted on Day 2 of the Singapore Fintech Festival x Singapore Week of Innovation and TeCHnology.

Kickstarted by the MAS and the Bank of Thailand three years ago, the service will begin with a few banks on both sides. Participation will be scaled up to include more banks and non-bank providers over time, said Mr Menon. MAS is also keen to partner other central banks in the region to expand the linkage across South-east Asia, he added.

Industry observers lauded this as a welcome, long-awaited development.

Kanv Pandit, group managing director for Banking Solutions in the Asia-Pacific at tech-solutions provider FIS, said: "While many domestic markets across South-east Asia already promote real-time services, achieving cross-border interoperability is the core issue."

This is a blueprint for how central banks can cooperate to build an open network through which all payment stakeholders can move money instantly and transparently, he said.

Anand Bindumadhavan, Payments Lead for South-east Asia at Accenture, said that it is a "great first-step" in facilitating financial services liberalisation in South-east Asia, bringing the region a step closer to regional integration.

"The collaboration will connect the region's two most mature instant-payment markets and marks an improvement on the current way of making cross-border payments, which now goes through a complex web of intermediaries, making it slow, costly and opaque," he said.

MAS is also seeking to make cross-border payments and settlements - "one of the biggest pain points for small and medium-sized enterprises" - quicker and more affordable. It embarked on Project Ubin five years ago to explore the use of blockchain, with the final phase of experimentation completed in July this year, in which a blockchain-based prototype for multi-currency settlement was successfully tested.

Now, industry players are moving from experimentation towards commercialisation, said Mr Menon.

DBS, JPMorgan and Temasek are leading the development of a digital multi-currency payments network aimed at enhancing commercial cross-border clearing and settlements globally, with pilot trials to commence next year.

A joint statement by the trio said the network will be available to banks in Singapore at first, with plans to expand access to others at a later stage. "The initial focus will be on domestic multi-currency payments, with the intention to expand offerings to a variety of other services progressively," they said, adding that the goal is to build "robust and sophisticated financial-market infrastructure and create an ecosystem for innovation enabled by blockchain technology".

Mr Menon said the goal of cheaper cross-border payments that settle round the clock and in real time is "drawing closer", with SMEs to gain.

Lawrence Loh, associate professor at NUS Business School, said: "For businesses and individuals, the tie-ups will open up new opportunities - not only in enabling transactions, but in spawning fintech start-ups to facilitate cross-border fund movements."

But even as the volume of cross-border payments grows, it may not be smooth sailing for the parties involved. "There will be increasing competition for future volume and revenue by new fintech players and non-banks," Accenture's Mr Bindumadhavan said. "The race to become the main instant-payments service provider between banks, fintechs and tech giants has begun."

Aside from cross-border payments, Mr Menon also emphasised sustainability as a key theme. In this arena, MAS is embarking on Project Greenprint, a technology platform to promote a green financial ecosystem.

This project provides a platform for SMEs and fintechs to connect to financial institutions and investors to assess a wider pool of capital and green solutions. It aims to deploy technology at different stages of the supply chain to better monitor commitment to the relevant green standards and requirements, he said. It will also explore the use of artificial intelligence (AI) and other technologies on third-party data sources to quantify the ESG (environmental, social and governance) impact of potential investments and loan portfolios.

MAS will set up a consortium of financial institutions, fintechs and industry players with expertise in green fintech to drive the project.

The central bank will earmark 20 per cent of the financial sector technology and innovation budget, or US$37 million out of US$185 million, to support green fintech projects. The funds can go into supporting proofs of concept, innovation labs, industry-wide utilities and technology platforms focused on green fintech.

"This (Covid-19) crisis presents us an opportunity to create a more inclusive society, and a more sustainable planet," said Mr Menon said in his concluding remarks. "Finance, technology and fintech can be powerful enablers in this endeavour."

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