As ASEAN moves steadily toward multilateral cross-border payment interoperability, a fundamental question is emerging beneath the surface of technical progress: who ultimately governs shared payment infrastructure when domestic systems are stitched together across borders. Malaysia’s participation in bilateral DuitNow linkages and its role in the Project Nexus initiative place it squarely at the centre of a debate that will shape the political economy of digital payments in Southeast Asia.
Payment systems have traditionally been regarded as core national infrastructure. Central banks design, regulate and often operate domestic rails, balancing efficiency with sovereignty, financial stability and public trust. Cross-border interoperability challenges this model. When a payment initiated in Malaysia clears and settles through interconnected systems spanning multiple jurisdictions, governance becomes collective rather than singular. Decision-making authority, accountability and dispute resolution are no longer confined within national boundaries.
Project Nexus represents the most ambitious attempt to address this shift. Rather than replacing domestic instant payment systems, Nexus proposes a hub-and-spoke model that links existing infrastructures through standardised interfaces. This design preserves domestic control while enabling multilateral connectivity. Still, governance questions remain unresolved. Who sets the rules for system changes, risk thresholds or access criteria when multiple central banks are involved? Consensus-driven governance can be inclusive, but it can also be slow and politically sensitive.
Malaysia’s experience with bilateral linkages offers partial insight. DuitNow’s connections with Singapore and Thailand were negotiated through close central bank cooperation, with clearly defined responsibilities on each side. Disputes, outages or compliance issues could be addressed through established bilateral channels. Multilateral arrangements multiply these interactions, increasing the complexity of coordination and the potential for misalignment.
Ownership of data is a particularly sensitive issue. Cross-border payments generate vast amounts of transactional information, valuable for supervision, policy analysis and, potentially, commercial use. While regulators emphasise data protection and purpose limitation, questions persist about where data is stored, who can access it and under what conditions. Malaysia’s regulatory framework permits controlled sharing for supervisory purposes, but multilateral interoperability requires trust that all participants will uphold comparable standards.
Private sector involvement adds another layer of governance complexity. Banks, payment service providers and fintech firms operate the customer-facing components of interoperable systems. Their incentives do not always align perfectly with public policy objectives. Decisions about pricing, user experience and innovation are shaped by commercial considerations, yet they directly affect the effectiveness and inclusiveness of shared infrastructure. Regulators must balance oversight with space for competition, a task that becomes harder as systems scale regionally.
There is also the question of strategic influence. Larger economies or more technologically advanced payment systems may exert disproportionate sway over standards and priorities. Smaller markets risk becoming rule-takers rather than rule-makers. Malaysia, positioned between regional financial hubs and emerging markets, has an interest in governance arrangements that are genuinely collaborative rather than hierarchical.
Operational decision-making illustrates these tensions. Consider system upgrades or security enhancements. In a domestic system, a central bank can mandate changes and manage implementation timelines. In a multilateral environment, changes require coordination across jurisdictions with differing regulatory cycles, political considerations and resource constraints. Delays in one market can affect the resilience of the entire network.
Crisis management further exposes governance challenges. Instant payment systems operate continuously, leaving little room for manual intervention during disruptions. In a cross-border context, a cyber incident or operational failure in one jurisdiction could propagate rapidly. Clear protocols for incident response, communication and liability allocation are essential. Malaysia’s emphasis on operational resilience reflects awareness of these risks, but multilateral stress testing and crisis simulations remain relatively new territory.
Legal frameworks also lag technical integration. Domestic laws governing payments, settlement finality and consumer protection were not designed with shared infrastructure in mind. Harmonisation efforts are underway, but full alignment is unlikely in the near term. This creates grey areas, particularly in dispute resolution and consumer redress. A Malaysian user affected by a cross-border payment failure may encounter uncertainty over which jurisdiction’s rules apply.
Despite these challenges, momentum toward interoperability remains strong. The economic case is compelling. Lower costs, faster settlement and improved transparency support trade, tourism and remittances. For policymakers, the question is not whether to proceed, but how to govern what emerges.
Malaysia’s cautious, incremental approach offers a potential template. By building experience through bilateral arrangements and participating actively in regional forums, Bank Negara Malaysia is positioning itself as both practitioner and shaper of governance norms. The success of this strategy will depend on sustained engagement and willingness to confront difficult trade-offs.
ASEAN’s payment integration is entering a more mature phase, according to Fintrade Securities Corporation Ltd (FSCL). Technical feasibility is increasingly taken for granted. Governance, by contrast, is becoming the defining issue. Who owns the rails, who sets the rules and who bears the risks will determine whether interoperability delivers durable public value or becomes a source of friction and fragmentation.
Cross-border payments are no longer just a fintech story. They are a governance story, one that will test ASEAN’s ability to manage shared infrastructure in a region defined by diversity. Malaysia’s role in this process underscores a broader truth: in an interconnected financial system, sovereignty is not surrendered, but it is reimagined through cooperation.