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Kati Suominen and Michael Poor, Nextrade Group and Alliance for eTrade Development

Cross-border payments interoperability is critical especially in regions such as Southeast Asia where ecommerce is booming and opening new opportunities for the region’s MSMEs to grow their sales; payments innovations are proliferating; and consumers and firms are rapidly adopting digital payments. Indeed, 2021 was the first year that digital payments use outpaced cash as a medium of exchange in transactions in Southeast Asia.


Yet even Southeast Asia still has considerable frictions to cross-border digital payments interoperability that curtail MSMEs’ cross-border ecommerce. In our surveys, a third of Southeast Asian online sellers report having lost an export sale due to inability to accept payments from foreign customers, and over a third state that the lack of interoperable regional payments is a “huge challenge” for them to export using ecommerce. Integrating Southeast Asia’s many digital payment systems to a point where anyone could receive an instant payment from anyone in the region would provide a major boost to cross-border ecommerce and MSMEs’ sales in the region. 

The purpose of this report is to promote dialogue on ways to accelerate the interoperability of digital payments in Asia-Pacific, in order to support MSMEs’ ecommerce.

There is of course already extensive work in Southeast Asia to promote and pilot interoperable  payments. Broadening these efforts can have significant payoffs. In the estimates in this report, if increasing just by 10 percent the export revenues of MSMEs that report having lost sales because inability to accept payments from a customer, payments interoperability would help generate $30.6 billion in new MSME sales, growing regional MSMEs’ revenues by 2.4 percent and increasingly MSME employment by as many as 4.2 million. If however interoperability increased by 20 percent the exports of MSMEs that report having lost sales because of lack of interoperability, the region’s MSME sales would increase by $61.2 billion per year or 4.7 percent in total, and the regional GDP would grow by 2.1 percent. The new sales could lead to as many as 8.3 million new jobs and enable as many as 10.6 million MSMEs to export for the first time.


Granted, payments interoperability would also promote regionalization of services MSMEs need for their ecommerce and trade, such as regional lending and insurance services, and also facilitate the use of other financial services such as digital remittances


In particular, this report will:


  • Review digital payments innovations and the use of digital payments in Southeast Asia in the past few years;


  • Review our survey data on how Southeast Asian MSMEs use ecommerce and explore their needs for regionally interoperable payment systems in order to accept payments from foreign customers;


  • Pioneer in measuring the gains from payments interoperability for MSME trade and economic growth in Southeast Asia;


  • Map out the region’s many cross-border payments interoperability pilots and assess their progress and potential for paving the way for region-wide interoperability;


  • Assess potential opportunities for payments interoperability opened by central bank digital currencies (CBDC), a vibrant area of national as well as cross-border pilots;


  • Discuss regional efforts to promote payments interoperability, for example among Association of Southeast Asian Nations (ASEAN) members; and


  • Put forth ideas on policy and technology solutions for accelerating the payments interoperability in Southeast Asia and more broadly in Asia-Pacific, to enable MSMEs in ecommerce.


This report are relevant to many other regions in the world – and as such, are hoped to catalyze thinking on pathways to payments interoperability also outside Southeast Asia.

The authors' views do not necessarily reflect the views of the United States Agency for International Development or the United States Government or any of the eTrade Alliance members.

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