SWIFT cites high cost of splintered financial world

Many digital payment platforms remain disconnected from each other.

Regulatory differences, emerging digital assets, and outdated banking infrastructure are leading to a more fragmented financial world, with projected economic losses of as much as $6.5t by 2030, according to SWIFT SC.

Whilst there are now dozens of ways to pay and transfer money across borders, many of these platforms remain disconnected from one another, Kevin Wong, CEO at SWIFT Asia Pacific, told Asian Banking & Finance.

“Financial fragmentation in 2025 is being driven by regulatory divergence and a lack of interoperability between financial systems,” he said in an emailed reply to questions.

Fragmentation adds friction to international trade and hinders global economic growth, with projected economic losses of as much as 6% of global economic output five years from now, according to a January report by the Economist Impact commissioned by the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

Almost 280 million fewer jobs will be created, innovation slows, financial inclusion efforts are stymied, and risk and uncertainty increases, according to the research.

“Siloed banking infrastructures and inconsistent adoption of industry standards like ISO 20022 continue to contribute to fragmentation and increased transaction costs across borders,” Wong said.

Many of the payment options in Southeast Asia remain disconnected internationally. For example, QR PH—the Philippines’ standardized quick-response code system based on the Europay-Mastercard-VISA standard—still does not accept Apple Pay.

This leads to “digital islands,” where different financial ecosystems operate independently, creating inefficiencies and trade barriers, he pointed out. Banks also have to deal with higher regulatory costs that they pass on to consumers, he added.

“The emergence of new digital assets and currencies is also introducing additional complexity, particularly in the absence of unifying standards or seamless integration with traditional systems,” Wong said.

Central bank digital currencies (CBDC), for example, could worsen fragmentation just as much as they can streamline payments.

“Currently, 134 markets are exploring CBDCs, and whilst the scale is impressive, without interconnectivity between platforms, global adoption is set to remain fragmented,” he pointed out.

Wong said the industry should work with policymakers whilst developing a common standard for cross-chain interoperability to ensure “smoother and more efficient cross-border transactions.”

In Europe, for example, the European Securities and Markets Authority wants greater powers to align financial rules within the European Union, simplify compliance and enhance market integration, Wong said.

“Furthermore, international bodies emphasise the importance of collaboration among financial powers to ensure stability, including transparent data-sharing and inclusive decision-making to prevent system fragmentation,” he added.

Banks can improve the payment experience by working with other lenders in detecting and preventing fraud to boost confidence in digital transactions, Wong said.

“By using federated learning, banks can train AI (artificial intelligence) models on their own data and share the learnings without sharing the data itself, thus maintaining data confidentiality,” he added.