Navigating cross-border payments in 2025: Three key considerations for Asia Pacific

The last few years have witnessed a rapidly evolving cross-border payment landscape in Asia Pacific. Across the region, financial institutions and FinTechs have made significant headway in areas like central bank digital currencies (CBDCs) and real-time payments.

However, several challenges remain that impede further progress. Potential CBDC fragmentation, legacy systems, and rising digital fraud pose difficulties. As 2025 approaches, regulators, financial institutions, and FinTechs must understand three key gaps and address them.

#1 Preventing fragmentation amid CBDC innovation

The region is a hub of CBDC experimentation. For example, the Monetary Authority of Singapore is currently developing wholesale CBDCs (wCBDCs) for cross-border payments after running successful CBDC trials as part of Project Ubin+.^[1] In the Philippines, the Bangko Sentral ng Pilipinas (BSP), the country’s central bank, is actively working to launch wCBDCs by 2029.^[2]

However, as various projects advance at different paces, central banks risk fragmentation in future CBDC cross-border payments if unified standards are not established. Without coordination, disparate systems may create operational vulnerabilities and inefficiencies, increasing costs and complexity for both regulators and banks.

Conducting CBDC interoperability trials should be a top priority for central banks, financial institutions, and FinTechs. A key example is Project mBridge, a collaborative CBDC initiative involving mainland China, Hong Kong, Thailand, and the United Arab Emirates. In June of this year, the project developed a minimum viable product for a multi-CBDC platform, linking the participating countries.^[3]

Global forums on CBDC interoperability are invaluable for sharing knowledge and best practices. Banks and regulators in the Asia Pacific region should increase their participation in events hosted by global organizations such as the International Monetary Fund (IMF) and Bank of International Settlements (BIS) to gain deeper insights into overcoming interoperability challenges.

#2 Harnessing legacy systems when transforming cross-border payments

While the Asia Pacific region is driving transformation in technologies like CBDCs, it continues to grapple with the legacy systems underpinning cross-border payments. Although a number of banks in the region are participants in bi-lateral, cross-border, real-time payment (RTP) schemes, such as the linkage between Singapore’s PayNow and Thailand’s PromptPay, not all financial institutions are progressing at the same pace.

Currently, about 14% of financial institutions still use legacy systems.^[4] Ripping and replacing traditional infrastructure is seen as risky due to fear of operational downtime, high costs, and compatibility issues. However, holding onto legacy systems costs more in the long run. Legacy maintenance will cost financial institutions USD 57.1 billion in 2028.^[5] Furthermore, the impending deadline for ISO 20022 introduces urgency to transformation. Banks that fail to migrate to a future-ready platform could lose out, missing on a potentially 42% increase in payments revenue.^[6]

A more effective strategy is gradual transformation, integrating new platforms alongside existing systems. It is an approach that treats legacy standards and the systems underpinning them as stepping stones, instead of roadblocks, to achieving transformation goals. An example of such an approach is Swift’s ISO 20022 coexistence period from March 2023 to November 2025.^[7] This transitional phase allows the legacy MT (Message Type) standard and the new ISO 20022 messaging standards to be supported simultaneously.

“While it is always exciting to leverage new standards, it is also important to acknowledge the reality of legacy systems. When speaking to clients about transformation, I usually advise them to look at what they have currently and go from there.”

Sharon Toh, Head of ASEAN, Swift

Financial institutions can transition gradually and effectively with tools such as converters, translators, middleware, and APIs. Converters and translators transform new financial messaging protocols into formats compatible with legacy systems, allowing organizations to adopt modern standards without a complete infrastructure overhaul. Middleware and APIs facilitate efficient payment processing, enabling banks to enhance their operational capabilities while still leveraging traditional systems. Additionally, adopting a composable payment architecture empowers banks with a modular approach that harnesses the rich data capabilities of contemporary financial protocols without disrupting traditional systems.

By integrating these technologies, financial institutions can navigate transitions smoothly while maximizing their existing resources.

#3 Managing account-based fraud with artificial intelligence (AI)

As digital services proliferate in Asia Pacific, cybercriminals are seizing opportunities to exploit them via digital channels. In 2023, digital fraud—encompassing cybercrime activities conducted online and through mobile devices—surpassed traditional, offline fraudulent activities, such as in-store fraud, for the first time in the region. This shift marks a significant turning point. Digital fraud now accounts for over half of the total fraud losses in Asia Pacific, highlighting the growing prevalence of cyber threats.^[8]

New account creation fraud is the most prevalent fraud type experienced by financial institutions. About 46% of financial institutions experienced it in 2023, followed by account login and fund distribution frauds.^[9] In frauds involving new account creation, cybercriminals use stolen or fabricated personal information to open new accounts for illicit purposes like money laundering, credit card fraud, and making fraudulent purchases.

The stolen or synthetic identities used by fraudsters to open new accounts often appear valid on the surface. This makes it difficult for banks’ automated systems to distinguish between genuine accounts and those opened for fraudulent activities. Fraudsters often exhibit behaviors designed to mimic legitimate users, such as waiting for a period before making large transactions or using devices and IP addresses that appear normal.

To combat fraudulent account creation, the financial ecosystem requires innovative approaches, especially in the realm of AI. AI plays a vital role in limiting the creation of fraudulent accounts and the nefarious activities associated with them. For instance, AI-powered identity verification systems harness biometric data, like facial recognition, and document verification to confirm individuals’ identities, reducing the risk of identity fraud by detecting deepfakes or manipulated documents.

To prevent fraudulent transactions, AI continuously analyzes transaction data for unusual patterns—such as atypical amounts, locations, or frequencies—allowing for immediate intervention. Additionally, AI algorithms can establish a baseline of normal customer behavior from historical data. If deviations occur, like a sudden large purchase, the system can automatically block the transaction and alert security teams.

As digital fraud surpasses traditional fraud in Asia Pacific, financial institutions must adopt AI-driven solutions to combat increasingly sophisticated threats. By leveraging AI and fostering industry collaboration, institutions can proactively protect their assets and customers in an evolving digital landscape.

Driving cross-border payment innovation in 2025

These three considerations will help financial institutions and FinTechs navigate the complexities of cross-border payments in 2025 and beyond. With the ISO 20022 deadline approaching at the end of 2025, organizations should prioritize transforming their payment systems, adopting a phased approach if necessary. A modernized payment infrastructure also paves the way for future innovations in CBDCs and enhanced security. By taking these strategic steps, financial institutions and FinTechs can better capitalize on opportunities and succeed in the evolving financial landscape.

^[1] Monetary Authority of Singapore (MAS), Project Ubin: Central Bank Digital Money using Distributed Ledger Technology, accessed Aug 2024.

^[2] Philstar.com, BSP-issued digital currencies likely by 2029, July 2024.

^[3] Bank of International Settlements, Project mBridge reaches minimum viable product stage and invites further international participation, June 2024.

^[4] IDC and Episode Six, Future-Ready Payments Platforms Enabling the Next Phase of Growth for Banks, June 2023.

^[5] Ibid.

^[6] Ibid.

^[7] Swift, ISO 20022 coexistence begins, opening new possibilities for cross-border payments, March 2023.

^[8] LexisNexis Risk Solutions, LexisNexis True Cost of Fraud Study – Asia Pacific, April 2024.

^[9] Ibid.