Payment Choice in Asia-Pacific: The Big Problem of Fragmentation

Innovation Meets a Major Challenge

The Asia-Pacific (APAC) region is one of the most exciting places in the world for digital payments. From mobile wallets in China to real-time payment systems in India and Singapore, people have more ways than ever to pay for goods and services. However, behind the impressive growth and innovation lies a serious challenge that limits payment choice and convenience across the region: fragmentation.

What Fragmentation Means

Fragmentation means that each country has its own set of rules, systems, and technologies for payments, and these often do not work well together. This can be seen most clearly in the fact that financial regulations vary widely from country to country. Unlike Europe, which operates under a more unified framework for financial services, APAC has no single set of payment rules. A payment company that wants to operate across several markets must obtain separate licenses for each one and follow different laws in every jurisdiction. On top of that, rules around data privacy, anti-money laundering checks, and transaction reporting differ from place to place, making expansion costly and complex—especially for smaller businesses and fintech start-ups.

Systems That Don’t Connect

The second part of the problem is that many of the region’s advanced domestic payment systems are built to operate only within national borders. Countries like India, Singapore, and Thailand have created world-class real-time payment systems—UPI, PayNow, and PromptPay respectively—that allow citizens to send money instantly and cheaply. Yet these systems often cannot “talk” to one another. This means that sending money from Thailand to Singapore or making an instant payment between India and Malaysia may not be straightforward, even if the underlying technology in each country is capable of it.

The Digital Currency Dilemma

A third complication comes from the rise of Central Bank Digital Currencies (CBDCs). Many APAC central banks are testing their own digital currencies, hoping to modernise payment infrastructure. While these initiatives are exciting, they risk making the problem worse if they are developed in isolation. If each country builds its CBDC differently, without common technical or legal standards, they could end up with yet another set of incompatible systems that do not work well across borders.

Why It Matters

This fragmentation has consequences for everyone. Consumers feel the impact when they travel or send money abroad and discover that their favourite payment app does not work, or that cross-border transfers are slow and expensive. Businesses, too, face challenges, as they must navigate multiple compliance requirements and manage complex settlement arrangements, which drives up costs and slows growth. On a larger scale, the entire regional economy is affected. Fragmented systems make it harder for digital trade to flourish and for financial services to reach those who remain outside the banking system.

Despite these challenges, there are promising efforts underway to make APAC payments more connected. One of the most significant is Project Nexus, led by the Bank for International Settlements. This initiative aims to link countries’ real-time payment systems so that sending money internationally within the region becomes as fast and easy as sending it domestically. The target is to have this in place by 2026, with countries such as India, Singapore, Thailand, Malaysia, and the Philippines already involved.

Another step forward is the ASEAN Integrated QR Code Payment System, which allows travellers to pay in another country by scanning a QR code with their local payment app, while still using their home currency. This makes payments simpler for both shoppers and merchants, though so far it is only available in a few participating countries. Meanwhile, projects such as mBridge are exploring how different countries’ CBDCs could work together for faster, cheaper cross-border transfers, offering a possible solution to the problem of digital currency incompatibility.

The Road Ahead

If these initiatives succeed, the benefits could be enormous. People could travel, shop online, and send money across borders with the same ease they enjoy at home. Businesses could sell to customers anywhere in the region without worrying about payment barriers or excessive costs. More importantly, digital financial services could reach millions of people who are currently excluded from formal banking systems.

The Asia-Pacific region is overflowing with payment innovation, but too often these innovations remain trapped within national borders. Without greater cooperation and shared standards, APAC risks building dozens of powerful but isolated islands of payment technology. The challenge now is to connect these islands into a truly integrated regional payment network. Only then will payment choice in APAC reach its full potential.