New payment technologies and innovation

Pursuant to the Law on the Central Bank (Bank of Mongolia) and the Law on the National Payment System, the Bank of Mongolia is responsible for formulating payment system policy and overseeing and regulating the operation of the national payment system. In fulfilling this mandate, the Bank of Mongolia continuously monitors emerging payment services, instruments, and infrastructure to ensure that the public has access to safe, reliable, and inclusive payment services while mitigating potential risks to the financial system. Although the adoption of the International Bank Account Number (IBAN) system for both domestic and international payments represents a strategic, long-term modernization initiative, its implementation has raised public concerns regarding the difficulty of memorizing IBANs and the inconvenience associated with their use in routine retail transactions. Accordingly, further measures are needed to enhance the user-friendliness of IBANs, streamline payment processes, and improve the overall effectiveness of the system’s implementation.

There is an urgent need to reduce the cost and processing time of cross-border payments through the adoption of modern technologies and innovative payment solutions. At the same time, the growing global adoption of emerging payment technologies, distributed ledger technology (DLT), and stablecoins presents new challenges and risks relating to monetary sovereignty, consumer protection, and anti-money laundering and counter-terrorist financing frameworks. In response to these developments, the Bank of Mongolia needs to undertake research and conduct pilot projects on CBDC, tokenized payment instruments, and innovative cross-border payment infrastructure to assess their feasibility, potential benefits, and associated risks.

Furthermore, the ongoing digitalization of central bank operations and the expanding use of payment systems, big data, real-time information exchange, artificial intelligence, and advanced analytics are heightening cyber risks to information systems, data assets, and technological infrastructure. In this context, the establishment of a comprehensive and integrated information security framework is essential to strengthen cybersecurity resilience, safeguard sensitive information, and ensure the security, integrity, and continuity of critical systems and operations.

The Bank of Mongolia’s Medium-Term Strategy (2026–2030) sets out measures to promote the development and accessibility of digital money and fintech, while strengthening the security of the payment system. These measures include introducing payment services based on distributed ledger technology, establishing a technologically advanced backup center, and strengthening integrated information technology governance, as well as the security and reliability of information technology systems. These initiatives include:

• Introduce advanced payment solutions to facilitate the convenient and efficient receipt of payments for goods and products sold in international markets.
• Foster an enabling environment that allows individuals and businesses to access world-class financial services seamlessly and efficiently.
• Establish a data backup and recovery center equipped with artificial intelligence-based monitoring systems, energy-efficient solutions, and technologies that utilize renewable energy.
• Align and implement information technology policies and modernization initiatives with the institution’s overall strategy, core mandates, and operational requirements.

• Increasing financial inclusion through payment systems: Financial inclusion will be enhanced by introducing a "Simplified payment service" that enables seamless interbank transactions using payment QR codes and advanced smartphone features, eliminating the need for customers to memorize or manually enter IBAN when making payments.
• Researching new payment and settlement channels aligned with international best practices, specifically CBDC and stablecoins: To align with modern technological trends and significantly accelerate the transmission and impact of monetary policy rates within the market, we will complete foundational research on CBDCs and stablecoins and make preparations for domestic market pilots. Under cross-border payment initiative based on distributed ledger technology the mBridge project, pilot operations for executing cross-border payments will be launched, creating the potential to drastically reduce cross-border transaction costs and processing times.
• Establishing a latest information technology backup center: Full preparations will be made to construct a new backup center that is fully protected against cyberattacks, utilizes green energy, and possesses the capacity to ensure the continuity and reliability of payment and settlement operations. Furthermore, the Bank of Mongolia will ensure the continuous and reliable operation of the payment systems it manages at a level of no less than 99.9 percent.
• Implementation of the ISO27001:2022 standard: Establish an Information Security Management System in accordance with international standards to strengthen cybersecurity infrastructure and protective capabilities. Develop a framework aligned with international standards designed to manage information security risks, evaluate control measures, respond to cyber incidents, and ensure business continuity.

Implementing the measures by 2027 will establish a framework to support technological upgrades for payment system participants. Furthermore, piloting and introducing advanced technology-based payment services will enable multi-channel cross-border settlements and facilitate easier access to financial services for residents in remote areas.

This will strengthen the Bank of Mongolia’s integrated framework for information security management, oversight, roles, and responsibilities, while enhancing the capacity to identify, assess, and mitigate potential risks to information and systems.

Establishing a policy, regulatory, and supervisory framework for payment systems that aligns with international standards while accounting for risks by creating an environment to introduce emerging advanced payment instruments and pilot new services based on distributed ledger technology, all within the context of technological innovation and digital transformation.