This week, the National Bank of Cambodia (NBC) and Malaysian bank Maybank launched a mobile cross border remittance service. Users of Bakong – Cambodia’s payment system that uses a quasi central bank digital currency (CBDC) – can now receive funds of up to USD $2,500 from Maybank’s MAE app customers in Malaysia at a lower cost and in real-time.
When it comes to researching CBDCs, improving cross-border transactions is a key motivation for many central banks. This is because a large proportion of international remittances is made from people sending money back home.
In 2020, the total value of remittances across the world totaled $702 billion, of which $540 billion was to low and middle-income countries, according to figures from the World Bank.
Yet despite the high demand, remittances are typically slow, expensive and subject to variable fees, depending on the region, provider or corridor.
A CBDC solution can radically reduce the costs. In this case, there is a “minimal service fee’ from Maybank.
A digital solution would also tackle the common problem of identity verification. The Maybank-Bakong cross-border transfer service eliminates the need for bank accounts, using just the mobile phone numbers of recipients registered with the Bakong e-wallet. However, whenever a Bakong wallet is created, a bank account is set up in the background. This is one of the ways Cambodia is addressing payments for its largely unbanked population.
The first phase of the project only allows for payments to be made one way from Malaysia in Ringgits to Cambodia in U.S. dollars.
“One of the main reasons for Bakong is to make usage of the local currency easier for the people, more convenient. And so ultimately what we want to see is direct conversion from (Malaysia’s) Ringgit to (Cambodia’s) Riel,” said Dr. Chea Serey, Assistant Governor of the National Bank of Cambodia (NBC).
Strictly speaking, Bakong is a blockchain-based central bank payment system that uses digital currency. Some label it as a ‘quasi-CBDC’. It’s not a conventional CBDC because many payments are not in local Riel and the wallets are linked to bank accounts.
Meanwhile, this week, it was revealed that the Bank of Korea will also be advancing its cross-border CBDC trials with participation from Samsung, which will research cross-border payments to other mobile phones or connected bank accounts.
In other country-specific CBDC decisions this week, the Bank of Ghana announced it has signed a contract with German’s Giesecke and Devrient to pilot its e-Cedi.