Russia, China & India to set up alternative to SWIFT payment system to connect 3 billion people
Members of the BRICS trade bloc Russia, India, and China have decided to connect their financial messaging systems to bypass the SWIFT international money transfer network.
Russia’s financial messaging system SPFS will be linked with the Chinese cross-border interbank payment system CIPS. While India does not have a domestic financial messaging system yet, it plans to combine the Central Bank of Russia’s platform with a domestic service that is in development.
The new system is expected to work as a “gateway” model when messages on payments are transcoded in accordance with a certain financial system.
According to Izvestia, the parties involved will work on a single platform, without experiencing any difficulties with transactions.
Russia began development of SPFS in 2014 amid Washington’s threats to disconnect the country from SWIFT. The first transaction on the SPFS network involving a non-bank enterprise was made in December 2017.
“We have an opportunity to connect both foreign banks and foreign legal entities to the SPFS. Today, about 400 users are participating in the system. Agreements have already been concluded with eight foreign banks and 34 legal entities,” Alla Bakina, the director of the Bank of Russia’s national payment system, was cited as saying by Vesti.
Bakina explained that traffic through the system has been growing and currently accounts for around 15 percent of all internal traffic, up from 10-11 percent last year.
The EAEU (Eurasian Economic Union) countries are currently working with the Bank of Russia on technical options for connecting to the SPFS. Iran, which has officially joined the Russia-led free-trade zone (EAEU) this month also seeks to develop a joint alternative to SWIFT. Last year, SWIFT cut off some Iranian banks from its messaging system.SWIFT is based in Belgium, but its board includes executives from American banks with US federal law allowing the administration to act against banks and regulators across the globe.
Instead of SWIFT, a system that facilitates cross-border payments between 11,000 financial institutions in more than 200 countries worldwide, Moscow and Tehran will use their own domestically developed financial messaging systems to conduct trade.