Asia’s digitalization push is increasingly focused on growth, inclusion, regional trade and investment, and financial resilience amid a fragmenting global economy. Across the region, digitalization is already strengthening intraregional trade, supply-chain management, and new forms of financial access. Digital platforms, e-customs, digital certificates, and logistics technologies are making it easier for firms to participate in regional production networks and international trade. Digital financial services are also expanding access for households and small businesses, particularly in emerging markets where traditional banking channels have often been costly or limited.
This progress is impressive, but important gaps remain. Differences in digital infrastructure, regulatory frameworks, data governance, and financial systems continue to constrain the region’s ability to realize the full benefits of digitalization.
In this context, regional payment connectivity is emerging as a critical element of economic integration. In a recent European Central Bank working paper, Interlinking Payment Systems and Trade Flows, Minesso et al. (2026) find that countries with interlinked payment systems record trade volumes that are around 4% higher. The estimated effect is roughly half that of a trade agreement and about one-quarter that of a common currency area, suggesting that payment links can materially reduce cross-border trade costs. By making transactions faster, cheaper, more transparent, and more secure, interoperable payment systems can reduce the frictions that limit trade and investment, particularly for micro, small, and medium-sized enterprises. Nevertheless, payment connectivity is not a substitute for trade agreements. It does not create market-access commitments, harmonise rules of origin, or remove regulatory barriers to commerce.
This means that digital payment connectivity should be developed alongside digital trade policy, with payment interoperability aligned with rules governing data flows, digital identity, electronic transactions, cybersecurity, consumer protection, and digital contracts.
For payments, DEFA can help move ASEAN beyond a patchwork of bilateral arrangements towards greater compatibility in regulatory principles and operational standards. The objective should not necessarily be to impose identical rules across all economies. Rather, it should be to establish sufficiently compatible rules that allow systems to connect securely and businesses to operate across borders with confidence. If implemented effectively, this approach could reduce compliance costs, facilitate cross-border commerce, and enable smaller firms to participate more fully in an integrated ASEAN digital market.
Resilience requires bridges, not walls
Regional payment links and local-currency settlement can also contribute to financial resilience. However, better payment infrastructure should not be mistaken for a financial safety net.
The value of connectivity lies in additionality: a more diverse network of interoperable payment channels gives firms and financial institutions alternative routes through which legitimate economic activity can continue when one channel becomes congested, costly, or disrupted.
Local-currency settlement can also reduce unnecessary reliance on vehicle currencies for transactions between Asian economies. By reducing one conversion leg, it may lower foreign-exchange exposure, shorten settlement chains, and make transaction costs more transparent.
However, faster payment rails do not create foreign-currency liquidity in a crisis. Nor do they substitute for adequate reserves, swap arrangements, sound macroeconomic policies, or sufficiently deep foreign-exchange and hedging markets.
The policy objective should therefore be diversification without fragmentation.
The key question is whether new payment arrangements add efficient routes or erect new walls. Diversification strengthens resilience when systems are open, interoperable, secure, and connected to one another. Fragmentation emerges when systems become closed clubs, participation depends on geopolitical alignment, or incompatible standards increase the cost of moving between networks.
The goal should be to de-risk concentration without de-globalizing payments.
Asia should build more routes, not more walls. Digital payments, local-currency settlement, and interoperable financial infrastructure can support growth and resilience only if they remain open, trusted, secure, and connected to the wider global financial system.
Policy implications: from connectivity to trusted scale
The next phase of regional payment integration requires a shift from individual economies’ success stories to a scalable regional architecture. Four policy priorities are particularly important.
First, treat payment connectivity as core economic infrastructure.
Cross-border payment links should not be viewed simply as financial-sector innovation. They are part of the infrastructure supporting trade, investment, and economic integration.
Their impact will be greatest when payment systems are integrated with the wider digital trade ecosystem—including e-invoicing, digital contracts, customs modernisation, digital identity, and trusted data exchange. DEFA can provide an important framework for aligning these elements, ensuring that a transaction is not only technically possible but also legally valid, operationally smooth, and commercially reliable across borders.
Second, prioritise interoperability before scale.
Adding more bilateral payment links does not automatically produce a more integrated network. Without common or compatible standards, a larger network can become more complex and costly to operate.
ASEAN economies should therefore focus on compatibility in areas such as messaging standards, digital identity verification, know-your-customer requirements, anti-money laundering and countering the financing of terrorism, data protection, dispute resolution, consumer redress, fraud reporting, and settlement finality.
The objective should not be regulatory uniformity for its own sake. Different jurisdictions will continue to have different legal frameworks and policy priorities. What matters is that these frameworks are sufficiently transparent and compatible to allow banks, payment providers, businesses, and supervisors to operate across borders with confidence.
This is where regional cooperation can generate significant economies of scale. Rather than renegotiating every technical and regulatory issue for each bilateral connection, common principles and multilateral arrangements can reduce the cost of expanding the network.
Third, make interoperability inclusive.
Regional connectivity will have limited economic impact if only large banks and multinational firms can use it efficiently.
MSMEs and smaller financial institutions need affordable access to the same infrastructure. This requires attention not only to transaction fees but also to onboarding costs, compliance requirements, technical standards, and access to digital infrastructure.
A practical agenda could include proportionate and risk-based compliance requirements, shared regulatory sandboxes, transparent pricing, common approaches to fraud prevention, interoperable digital identity solutions, and support for digital literacy.
Industry consultation is equally important. Banks, payment providers, technology firms, and especially smaller businesses can identify practical barriers that may not be visible from a regulatory perspective.
Fourth, build governance for resilience—not just efficiency.
Payment systems need to work not only in normal times but also under stress.
Regional arrangements should establish clear frameworks for managing liquidity, settlement risk, cyber incidents, sanctions compliance, fraud, and operational outages. This requires supervisory cooperation, crisis-communication protocols, regular joint testing, and clear accountability among central banks, financial supervisors, payment operators, banks, and non-bank payment providers.
This dimension is critical because greater speed can also transmit risks more quickly. A payment system that settles in seconds but lacks coordinated procedures for handling cyber incidents, fraud, or operational disruption may create new vulnerabilities even as it reduces transaction costs.
Resilience therefore depends not simply on how quickly money moves, but on how effectively institutions coordinate under stress.
The Next Step: Strengthening Governance and Institutional Cooperation
Asia has become one of the most active regions in experimenting with cross-border payment connectivity, from bilateral fast-payment links to broader multilateral initiatives. These experiences offer important lessons.
First, true interoperability requires more than connecting technical rails. Technology is increasingly the least difficult part; the harder questions are institutional. What standards should systems use? How should participants be authenticated? Which rules should govern cross-border transactions? How should data be protected and shared? Who is responsible when a transaction fails? How should cyber incidents be managed? How should supervisors cooperate? And what happens when a payment system comes under stress?
True interoperability therefore requires compatible approaches to AML/CFT, KYC, data privacy, consumer protection, settlement finality, foreign-exchange arrangements, supervisory cooperation, and cyber resilience.
A payment may move in seconds, but if the regulatory processes behind it still take days, the system is not truly interoperable.
These issues become more important as the network expands. Each additional country brings another set of laws, institutional arrangements, policy priorities, and risk appetites. If every new connection requires a separate bilateral technical and regulatory negotiation, the network becomes increasingly costly and difficult to scale.
Multilateral frameworks can help address this problem by establishing common principles and reusable standards, turning individual bilateral successes into a more coherent regional network. The promise of digital finance is therefore not to create disconnected digital islands, but to build bridges that make regional integration more inclusive, resilient, and globally connected.
Second, the broader lesson for Asia is that digital payment connectivity should be viewed as part of the region’s economic architecture, rather than as an isolated technology project.
The objective is neither to replace the global financial system with a collection of regional systems nor to pursue connectivity at the expense of financial stability or regulatory safeguards.
The objective is to build more open, interoperable, and trusted routes through which trade, investment, and financial activity can take place.
Achieving this objective requires three elements.
First, connectivity: payment systems must be able to communicate and transact across borders.
Second, compatibility: the regulatory and institutional frameworks governing those systems must be sufficiently aligned for the network to scale.
Third, trust: businesses and households must be confident that payments will be secure, transactions will be protected, disputes will be resolved, and systems will remain reliable under stress.
If Asia can combine these three elements, digital finance can become more than a source of efficiency; it can provide an important foundation for regional integration and resilience.
Dr Cynyoung Park is the Executive Director of The SEACEN Centre.