ASEAN’s push toward cross-border payment interoperability is frequently framed as a leap toward financial inclusion. Faster settlement, lower costs and seamless regional connectivity are presented as structural solutions to long-standing inefficiencies. As Malaysia and its neighbours move closer to multilateral frameworks such as Project Nexus, a quieter concern is emerging within policy and industry circles: interoperability may modernise payments without meaningfully reaching the informal and underbanked segments that dominate much of South East Asia’s economic activity.
Malaysia’s DuitNow-linked corridors have demonstrated the technical feasibility of real-time cross-border payments. Tourists, micro-merchants and SMEs using domestic banking apps can transact across select ASEAN markets with unprecedented ease. However, these benefits accrue primarily to users already within the formal financial system. Bank account ownership, digital literacy and access to compliant payment providers remain prerequisites for participation. For millions operating partially or entirely outside these structures, interoperability offers limited immediate impact.
The scale of ASEAN’s informal economy underscores the challenge. According to regional development estimates, informal employment accounts for between 50 and 70 percent of total employment in several ASEAN economies. In Malaysia, while financial inclusion levels are higher than in some neighbouring countries, segments of the workforce still rely heavily on cash-based transactions, particularly in rural areas, traditional markets and cross-border informal trade corridors. These actors are often invisible to formal payment systems, regardless of how advanced interoperability becomes.
Cross-border informal trade illustrates the disconnect. Small traders operating along Malaysia’s borders with Thailand and Indonesia frequently move goods and services across jurisdictions without engaging formal banking channels. Payments are settled in cash or through informal value transfer systems that prioritise trust and immediacy over regulatory compliance. While these arrangements are inefficient and risky, they persist because formal alternatives are perceived as complex, costly or inaccessible.
Interoperable instant payment systems, by design, operate within regulated environments. Know-your-customer requirements, transaction monitoring and account-based access form the backbone of trust in these systems. Nonetheless, these same safeguards create friction for informal actors who lack formal identification, stable income documentation or digital access. Without parallel efforts to address onboarding barriers, interoperability risks reinforcing existing divides rather than closing them.
Malaysia’s policymakers are acutely aware of this tension. Financial inclusion strategies have increasingly focused on digital onboarding, simplified accounts and e-wallet adoption. However, cross-border interoperability adds layers of complexity that inclusion initiatives have yet to fully address. A wallet or account suitable for domestic micro-transactions may not meet the compliance standards required for cross-border use, particularly where currency conversion and foreign settlement are involved.
Cost dynamics further complicate inclusion outcomes. While instant payments reduce settlement delays, they do not automatically eliminate fees. For low-value transactions common in informal trade, even small charges can be prohibitive. Foreign exchange spreads, minimum transaction fees and merchant discount rates may discourage adoption among price-sensitive users. Without explicit pricing safeguards or subsidies, the promise of cheaper cross-border payments may remain theoretical for the informal economy.
Digital infrastructure disparities also matter. Interoperability presumes reliable internet access, smartphone penetration and platform literacy. In parts of ASEAN, these conditions remain uneven. Malaysia’s urban centres are well positioned to benefit, but rural communities and migrant workers may struggle to access or trust digital payment channels, particularly for cross-border transactions involving unfamiliar systems.
There is also a question of trust. Informal actors often prioritise certainty over efficiency. Cash provides immediate settlement and tangible control, attributes that digital systems must work hard to replicate psychologically. Interoperable payments, while fast, are mediated by institutions that informal users may view with suspicion. Building trust requires more than technical capability. It demands outreach, education and culturally informed design.
From a regulatory perspective, inclusion and integrity objectives can pull in opposite directions. Expanding access risks diluting safeguards, while tightening controls risks excluding vulnerable users. Malaysia’s approach has traditionally favoured incrementalism, testing solutions domestically before scaling regionally. Whether this model can accommodate informal cross-border users remains an open question. Some fintech providers see opportunity in this gap. Solutions combining simplified onboarding, tiered transaction limits and agent-assisted models are being explored across ASEAN. These approaches aim to bridge formal systems and informal practices without undermining regulatory objectives. Their success, however, depends on regulatory flexibility and cross-border coordination, both of which are still evolving.
ASEAN’s payment integration narrative is becoming more nuanced. Interoperability is no longer viewed as an end in itself, but as one component of a broader ecosystem that must balance efficiency, stability and inclusion. Malaysia’s experience highlights both the progress made and the gaps that remain.
As per financial advisory firm Fintrade Securities Corporation Ltd (FSCL), if cross-border payment reform is to fulfil its inclusion promise, policymakers will need to confront uncomfortable realities about who is being left behind. Technology can connect systems, but inclusion requires connecting people. Without deliberate intervention, interoperability may streamline regional finance while leaving the informal economy largely untouched, modernising the visible surface of ASEAN payments while deeper structural divides persist.