RENUKA RAI
Paro
The Central bank governors and senior officials from SAARC member countries have called for stronger regional cooperation, harmonised regulations, and trusted digital payment systems to unlock the full potential of cross-border digital payments and deepen financial integration across South Asia.
Themessge emerged durg the tw-day 49th SAARFINANCE Governors’ Group Symposium, hed in Paro under the theme “Cross-Border Digital Payments and Regional Financial Integration.”
Hosted by the Royal Monetary Authority (RMA), the symposium brought together governors, deputy governors, and senior representatives of central banks from SAARC member countries to discuss opportunities and challenges in creating a more connected regional financial ecosystem.
RMA Governor Yangchen Tshogyel in her opening remarks said SAARCFINANCE, established in 1998, has continued to serve as an important platform for cooperation among central banks by facilitating discussions on monetary policy, financial stability, and emerging economic challenges facing the region.
She said Bhutan’s decision to host the 49th Governors’ Group Meeting reflected the country’s commitment to strengthening regional cooperation and contributing to discussions on the future of financial integration.
Governor Yangchen said expanding digital payments and financial inclusion remain among the Royal Monetary Authority’s key priorities.
“Modern payment systems have the potential to improve financial inclusion by making financial services more accessible and affordable,” she said.
The symposium featured a Governors’ Panel Discussion on “Advancing Regional Financial Integration through Digital Payment Connectivity and Innovation,” moderated by RMA Deputy Governor Tshering Penjor.
During the discussion, RMA Governor Yangchen highlighted Bhutan’s digital payment journey, saying the digitisation of government payments has been one of the biggest contributors to the country’s growing digital payment ecosystem.
“Government payments have gone digital, and I believe that has been one of the biggest drivers of our digital payments ecosystem,” she said.
She explained that the Bhutan Financial Switch, operated by the RMA with technical assistance from the Reserve Bank of India, serves as the country’s interoperable payment infrastructure, enabling seamless transactions between individuals and merchants through a national QR payment system.
Governor Yangchen also highlighted Bhutan’s progress in cross-border payment connectivity through its integration with India’s National Payments Corporation of India (NPCI), enabling RuPay card acceptance and Unified Payments Interface (UPI)-based QR payments.
She said interoperability between Bhutan’s national QR platform and India’s UPI network had produced remarkable results.
“Once interoperability was achieved, transaction volumes increased 16-fold within a single year, simply because users could transact seamlessly across the integrated system,” she said.
She added that digital payment usage has continued to accelerate, with transaction volumes recorded during the first half of 2026 already surpassing the total transactions recorded throughout the previous year.
Bhutan is now working towards reverse UPI integration, which will allow Bhutanese travelling to India to make digital payments directly through Bhutanese banking applications.
The Governor Yangchen acknowledged that authorities had initially been concerned that easier digital payments could increase pressure on Bhutan’s Indian rupee reserves. However, she said people were already obtaining Indian currency through other means, making secure digital channels a more practical solution.
“Rather than maintaining friction, it made more sense to provide a secure, seamless, and fully digital payment channel,” she said.
During the symposium, Tshering Penjor said digital financial infrastructure is transforming economies throughout South Asia and creating new opportunities for regional cooperation.
He said cross-border payment systems, interoperable platforms, real-time settlement mechanisms, and emerging technologies have become important priorities for central banks.
“For economies such as ours, many of which are small, landlocked and still emerging, regional financial integration is not simply a matter of commercial convenience or technological ambition. It is a strategic lever for growth, resilience and greater economic sovereignty,” he said.
Tshering Penjor said stronger digital connectivity could reduce remittance costs, speed up trade settlements, improve transparency, attract investment, and expand access to financial services for farmers, small businesses, migrant workers, and rural communities.
At the same time, he cautioned that digital transformation must be accompanied by robust cybersecurity measures, effective regulatory coordination, and strong consumer protection frameworks. While participants acknowledged the significant progress made by SAARC countries in digitising domestic payment systems over the past decade, they agreed that cross-border digital payments remain slow, expensive, and operationally complex.
Central bank representatives said fragmented regulations, incompatible technical standards, multiple intermediary institutions, and cybersecurity risks continue to hinder regional financial integration.
They stressed that technology alone cannot achieve seamless cross-border payment connectivity.
Instead, they said stronger regulatory cooperation, common technical standards, and greater trust among financial institutions are equally important.
Officials noted that improving payment connectivity would deliver direct economic benefits by supporting remittances, tourism, trade, and cross-border commerce across South Asia.
To address existing challenges, the RMA outlined four strategic priorities: expanding regional payment connectivity, promoting shared technical standards before implementation, modernising legal and data governance frameworks, and maintaining internationally recognised cybersecurity standards.
The RMA also recommended harmonising regulatory frameworks among member countries, conducting comprehensive impact assessments before linking national payment systems, establishing permanent coordination mechanisms among central banks, and increasing public awareness to encourage wider adoption of digital payment services.
Officials emphasised that effective regional payment systems depend on the strength of each country’s domestic payment infrastructure.
“It requires trusted institutions, common standards, regional cooperation, and a shared commitment to collaboration,” an RMA official said, adding that Bhutan hopes its own digital payment experience will contribute to building a stronger and safer regional financial ecosystem.
Participants identified regulatory fragmentation as one of the biggest barriers to interoperability.
Countries currently operate under different foreign exchange regulations, data protection laws, customer identification requirements, and licensing frameworks, making it difficult to establish payment systems that function seamlessly across borders while remaining legally compliant.
The RMA said balancing domestic data localisation requirements with the need for cross-border data sharing remains another significant challenge. Customer information collected under one country’s Know Your Customer framework is not always recognised in another jurisdiction.
Representatives from the Reserve Bank of India also pointed to anti-money laundering and counter-terrorism financing requirements as major bottlenecks. Although most countries follow international standards established by the Financial Action Task Force, differences in domestic implementation increase compliance costs and complicate payment processing.
Technical challenges also remain. Many payment systems have been developed independently over several years using different messaging standards, settlement cycles, and technical architectures. While countries are gradually moving towards the global ISO 20022 messaging standard, varying QR code specifications continue to create interoperability challenges.
Participants further noted that many international transactions still rely on correspondent banking networks involving multiple intermediary banks, increasing transaction costs, delaying settlements, and reducing transparency, particularly for remittance payments.
Cybersecurity and consumer confidence also featured prominently in the discussions.
Officials warned that greater interconnection among payment systems also increases exposure to cyberattacks, fraud, and operational disruptions, requiring coordinated incident response mechanisms and continuous information sharing among regulators.
They added that cross-border payment disputes are often more complex than domestic transactions because multiple regulators, payment operators, and financial institutions may be involved in resolving liability issues.
Despite these challenges, central bank governors expressed confidence that regional payment interoperability can be achieved through gradual and coordinated cooperation.
The symposium concluded with member central banks reaffirming their commitment to strengthening collaboration and advancing secure, efficient, and interoperable digital payment systems across South Asia.
The 49th SAARCFINANCE Governors’ Group Symposium marked the second time Bhutan has hosted the regional event under its chairpersonship, following the 38th session held in 2019
