Payment Systems to Facilitate South Asian Integration

Abstract

Considerable technology-based evolution in payment systems offers opportunities for convergence to a regional payment system. Though South Asian wholesale payment systems are more developed, compared to retail, and smaller countries still lag behind, the South Asian Association for Regional Cooperation Payment Council offers a forum to facilitate convergence. The existing Asian Clearing Union can also be revitalized using developments in payment systems. Changes include faster settlement using real-time flow through the system backed by local liquidity encouraging local currency use, reduction in transaction costs and delays, expansion of facilities offered, types of flows allowed and number of participants. Invoicing in local currencies reduces pass through of changes in exchange rates, and hence lowers their inflationary impact. Electronic systems can discriminate between types of flows and provide detailed information without procedural delays, reducing security concerns.