Empowering Global South Growth and Currency Flows Through Integrated Digital Networks
Introduction:
This panel explored how integrated digital ecosystems can address structural issues in currency flows across the Global South. Comprising 88% of the world’s population, the Global South is emerging as a significant driver of the global economy, contributing 60% of GDP. However, challenges such as currency volatility, fragmented infrastructure, and limited access to global financial systems hinder the full realisation of its potential.
Key Challenges:
1. Currency Volatility:
- African currencies have depreciated by 73% on average over three years.
- Liquidity constraints and capital controls exacerbate the cost of cross-border trade.
2. Fragmented Infrastructure:
- Varied regulatory frameworks across countries hinder seamless operations.
- Legacy systems in some regions create inefficiencies, slowing payment processes to weeks.
3. Trust and Compliance:
- Difficulties in verifying trade partners and managing compliance requirements such as KYB/KYC/AML.
- Inadequate data standards impede efficient cross-border transactions.
4. Payment Risks:
- Settlement risks due to misaligned operating hours and lack of 24/7 infrastructure.
- Fraud and cybersecurity challenges increase the cost of compliance and risk management.
Proposed Solutions and Innovations:
1. Technology Innovations:
· Blockchain and Atomic Settlement:
o J.P. Morgan’s Connexus Digital Payments leverages blockchain to enable 24/7 programmable payments with reduced settlement risk.
o Liquid Group’s use of real-time settlement mechanisms for Africa-China trade corridors.
· Gen AI for Client Experience:
o Xiamen International Bank’s smart FX systems and AI-powered chatbots improve client accessibility and reduce transaction friction.
2. Trust Frameworks:
· Universal Trusted Credentials (UTC):
o A portable, digital identity system to verify trade authenticity and compliance.
o Collaboration among banks and regulators ensures legitimacy and reduces rejection rates.
· Pre-Validation Mechanisms:
o Ensuring beneficiary information accuracy before processing transactions, reducing delays.
3. Financial and Risk Innovations:
· Public-Private Partnerships:
o DBG collaborates with Ghana’s central bank and private banks to establish risk-sharing frameworks.
o Building robust data systems by integrating inputs from banks, businesses, and government agencies.
· Multi-Bank Liquidity Pools:
o Liquid Group’s model aggregates liquidity from multiple banks, enabling competitive FX rates.
4. Regulatory and Policy Enhancements:
· Harmonisation of regulatory standards across the Global South to reduce inefficiencies.
· Establishment of transparent corridors leveraging data harmonisation, HS codes, and trade documentation.
Future Directions:
1. Global South-to-South Trade Expansion:
- Supporting the $6.1 trillion trade opportunity through innovative digital ecosystems.
- Enhanced collaboration between stakeholders to build scalable solutions.
2. Adoption of Emerging Technology:
- Expansion of blockchain-based settlements to improve transparency and trust.
- Scaling digital identity systems and AI-driven tools for broader adoption.
3. Strengthened Partnerships:
- Cross-border cooperation between banks, fintechs, and regulators to align efforts.
- Engagement with international bodies to scale these innovations globally.
Closing Remarks:
The session underscored the transformative potential of digital ecosystems in addressing currency and infrastructure challenges in the Global South. From blockchain to AI and regulatory harmonisation, collaboration remains key to unlocking the region’s full potential. The opportunities are vast, and the solutions emerging are ready to scale globally.
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Speakers:
- Cyrus Bhathawalla, Chief Administrative Officer, J.P. Morgan Payments
- Jeremy Tan, Chief Executive Officer, Liquid Group
- Kwamina Duker, Chief Executive Officer, Development Bank Ghana
- Wang Bing Ling, Deputy Chief Executive, Chiyu Banking Corporation Limited, Hong Kong
Moderator:
- Eugene Goh, Deputy Director, Monetary Authority of Singapore