Bakong, a cross-border payments system based on Cambodia’s central bank digital currency ( CBDC ), has seen tremendous growth since its launch less than three years ago, and is now widely adopted not only domestically but in neighbouring countries as well.

In the first half of 2023, bakong transactions in the local currency jumped 4.7x year-on-year to 11.6 million, amounting to 12.2 trillion riel ( US$2.94 billion ), while US dollar transactions rose 1.6x to 21.3 million, amounting to US$8.7 billion.

The National Bank of Cambodia ( NBC ) launched bakong, named after an ancient Khmer temple, in October 2020 to foster the development of the country’s digital economy and, at the same time, to strengthen the Cambodian riel and reduce the country’s dependence on the US dollar.

With the support of Japanese fintech firm Soramitsu, bakong has become a reliable and popular payment system within the country and across borders.

Soramitsu established a standardized QR code in Cambodia and integrated it with all payment systems via bakong. This has allowed local payment platforms such as Wing and PiPay, despite having separate systems, to use the same QR code sender that can also be scanned by bakong.

This is in contrast to some other countries like Japan, where there is no standardized QR code system. “There's like 40 different services and they each have their own standard,” Makoto Takemiya, co-founder and chief executive officer of Soramitsu, tells The Asset in an interview. “If you're converting from Japanese yen to stablecoin, there’s a different set of laws and regulations than for converting from Japanese yen to foreign currency, so we're currently meeting regularly with the Financial Services Agency to work that out.”

Highlighting the efficiency of bakong, Takemiya notes that the system processes transactions 24/7, and “it takes only about three seconds to make a payment”.

All transactions are signed into a private key, which is automatically verified. “So it's really quite a high-security and highly reliable system,” he adds.

Growing popularity

Bakong is now being used for QR code-based digital transactions between Cambodia and neighbouring countries like Malaysia, Vietnam, and Thailand.

Maybank, for example, has linked up its MAE digital payments app with the bakong system, enabling Cambodians in Malaysia to send money directly to the bakong wallet accounts of their beneficiaries back home without having to pay agent bank fees.

Bakong has also gained popularity in Thailand, where there are around 300,000 Cambodian workers. Many of these workers have found it hard to open bank accounts and conduct financial transactions quickly in the country, and thus have turned to bakong as a convenient alternative, Takemiya notes.

In an effort to expand bakong’s reach, NBC is collaborating with other countries across Asia, Africa, Latin America, and Europe. The aim is to boost tourism, investment, and trade, while providing a way for Cambodian migrant workers to send remittances home.

In June, the central bank held talks with the National Bank of Rwanda to explore ways to establish a bakong online payment system in the African country.

“Africa is a very enticing market. It's a rising star that everyone really wants to grow there. It’s like a land grab, and there's a lot of especially European companies that are trying to take the market share in the area,” says Takemiya.