Settling international payments is straightforward today— one provides the necessary bank details, and funds can cross borders seamlessly. However, the inception of such a mechanism was conceived only recently (1973) when 239 banks from 15 countries came together to generate a solution on how to settle cross-border payments.[1] This cooperative was formed in Belgium and called themselves the Society for Worldwide Interbank Financial Telecommunication (SWIFT). SWIFT is an efficient and secure method of transferring messages (i.e. financial transactions) across international boundaries and is the predominant financial infrastructure used by over 11,000 financial institutions to settle international settlements across 200 countries.
While SWIFT was established to foster global financial cooperation and neutrality,[2] its evolution has seen it increasingly serve as a geopolitical tool, often wielded to enforce the policies of powerful nations like the United States. This was done in 2012 when Iranian banks were disconnected from SWIFT after surmounting pressure from the U.S. and the European Union,[3] and again in 2022 when key banks in Russia were effectively excluded from SWIFT after Russia invaded Ukraine.[4]
The US has leveraged its unique position as a leader within the global financial system to influence SWIFT to enact favourable actions even those considered harmful to its allies. A clear illustration of this is in 2018 when President Trump withdrew from the Iran Nuclear Agreement (JCPOA), reimposed sanctions,[5] and exerted political and diplomatic pressure on SWIFT to once again ban Iranian Banks.[6]
This is all largely possible due to the U.S. dollar serving as the world’s reserve currency, thereby being utilised for over 50% of international trade, foreign reserves, and cross-border financial transactions.[7] Secondly, the U.S. employs the use of “secondary sanctions” as an influential tool wherein third-party countries or companies that conduct business with sanctioned nations through SWIFT are penalized for doing so.[8] The mere threat of being sanctioned and excluded from the system is able to coerce most financial actors to comply with US policy. To extricate the US’ influence from SWIFT would be an arduous task. However, a payment system that can be easily influenced to this extent by one of its members remains disadvantageous to all others— especially ones vying for increasing prominence.
Alternatives to SWIFT
In response to SWIFT’s increasing alignment with Western geopolitical agendas, Russia developed its own payment system, System for Transfer of Financial Messages (SPFS), to safeguard its financial autonomy and bypass sanctions- especially after Russia’s annexation of Crimea.[9] In March 2023, a mandate from the Central bank of Russia obligated all domestic banks to route all domestic financial transactions through the SPFS.[10] Russia has been making large attempts to promulgate the international use of this system- in 2024 it was reported that four new countries had joined the SPFS network- bringing the number to 150 foreign organisations participating across 20 countries.[11] However, it is crucial to highlight that SPFS lacks the extensive worldwide connectivity offered by SWIFT as it mostly comprises Russian Financial institutions. Moreover, the participants of SPFS tend to include countries with close ties to Russia and countries that face similar sanction pressure such as Iran, Belarus, and North Korea. Consequently, OFAC issued an alert of sanction risks against the SPFS and further underscored how it intends to take punitive actions- including sanctions- against foreign institutions that currently operate SPFS (citing that these institutions provide financial services to Russia and thereby support Russia in evading sanctions) or those who will join in the future.[12]
While SPFS primarily addresses Russia’s geopolitical and sanction-related challenges, India’s United Payments Interface (UPI)- launched in 2016- represents a distinct approach to payment systems, focusing on domestic financial inclusion with aspirations for international adoption. UPI is an instant real-time payments system designed to facilitate instant, seamless transactions through mobile phones (Peer-to-Peer)— for both domestic customers and retail.[13] The widespread appeal of UPI lies in its simplicity, as it uses mobile phone numbers to identify accounts. This approach significantly lowers the entry barriers, making it accessible even to users with minimal technical expertise. Furthermore, transaction costs are close to negligible which makes it appealing to consumers within a developing economy. Despite its domestic success, UPI’s international adoption faces significant hurdles. For one, it is intrinsically linked to transactions in Indian Rupees (INR), necessitating extensive modifications to enable multi-currency support for broader applicability. Secondly, UPI’s design caters to low-to-medium value payments with daily transaction limits of five lakh INR making it unsuitable for large-scale corporate or interbank settlements. Finally, its incompatibility with internationally recognized financial message standards such as ISO 20022 used by SWIFT constrains international growth. These factors underscore UPI’s potential as a driver of innovation but highlight the limitations that must be addressed to position it as a competitor to systems like SWIFT on the global stage. Despite this the Indian government has been promoting the adoption of the UPI internationally and has been collaborating with several Central Banks in Southeast Asia,[14] South America, and Africa.[15]
As both SPFS and UPI attempt to carve out niches in the global financial ecosystem, China’s Cross-Border Interbank Payment System (CIPS) has emerged as a formidable contender. CIPS was launched in 2016 to promote the usage of Yuan (RMB) as a denomination for cross-border financial settlements by leveraging its economic might and global infrastructure projects like the Belt and Road Initiative (BRI).[16] CIPS has established itself as a viable alternative to SWIFT, offering smoother transaction channels for participants in Asia, Africa, and Europe, many of whom are heavily engaged in trade with China.[17] CIPS’s interoperability with SWIFT is a crucial advantage, allowing financial actors to benefit from the existing infrastructure while transitioning to RMB-based transactions.[18] This interoperability mitigates entry barriers and enhances adoption. Furthermore, unlike Russia’s SPFS, CIPS has largely avoided being targeted by U.S. sanctions, enabling it to maintain broader international appeal. However, its primary limitation is its dependence on China’s economic ambitions and strategic interests, which may deter nations from being wary of over-reliance on the Chinese financial ecosystem.
BRICS- a response to a multipolar world order?
While India and Russia have pursued their own payment systems, they face stiff competition from an increasingly influential CIPS and current incumbent SWIFT. To continue to remain relevant in a multipolar world they must forge new avenues for exerting their political influence. Such a possibility may have presented itself with BRICS. Russia’s current chairmanship over the BRICS committee has seen it push for a ‘BRICS Bridge’— a blockchain-based network that would connect the Central Banks of each member state via a central bank digital currency (CBDC).[19] This would be similar to “Project mBridge” which is a project being incubated by the Bank of International Settlements (BIS) testing the feasibility of CBDC’s being used by commercial banks across China, Hong Kong, Saudi Arabia, Thailand, and the UAE.[20]
However, for these bridges to truly become successful it would require the creation of an intermediary currency capable of rivalling the US Dollar— which still offers deep liquidity, narrow spreads, and optimal exchange rates for most currency pairs.
BRICS has also been discussing the creation of such a composite currency, currently dubbed as “The Unit” which would comprise 40% gold and the remaining 60% by group member’s national currencies.[21] Through the utilisation of a common currency its members would eliminate the need for third-party currencies like the dollar or systems such as SWIFT, reduce transaction costs and help boost trade within the bloc. Additionally, there would be enough domestic demand for the BRICS currency as its ten members- all emerging economies- represent almost half of the planet’s population. This would have the intended consequence of making the currency more appealing to the international community thereby achieving competitive foreign exchange rates to the Dollar.
This would create a system and currency immune to US sanctions as the US’ influence is based on its control over the Dollar. Furthermore, by pooling their economic resources, BRICS nations could leverage their collective influence to influence monetary policies, reduce reliance on Western-dominated institutions such as the World Bank or the IMF and help negotiate better terms in trade agreements with other actors such as the EU. Finally, it would allow countries such as India, China, and Russia to mitigate risks associated with an over-reliance on the dollar.
Conclusion
Taken together, the rise of SPFS, UPI, and CIPS underscores the global desire for financial autonomy- for systems that are less susceptible to unilateral sanctions and geopolitical influence. Building on these efforts, BRICS’ pursuit of a composite currency represents a bold, albeit ambitious, step toward reshaping the global financial landscape. From navigating political resistance, as evidenced by President Trump’s 100% tariff threats,[22] to ensuring operational feasibility and widespread acceptance, the road ahead is uncertain. Nevertheless, the growing momentum behind these efforts reflects a shifting global order—one where emerging economies seek greater agency in financial governance. The outcome of these initiatives will not only redefine the global financial landscape but also serve as a litmus test for the efficacy of multilateral cooperation in an increasingly multipolar world.
[1]https://www.swift.com/about-us/history?utm
[2]https://www.swift.com/about-us/legal/compliance-0/swift-and-sanctions
[3]https://www.swift.com/insights/press-releases/swift-instructed-to-disconnect-sanctioned-iranian-banks-following-eu-council-decision
[4]https://foreignpolicy.com/2022/03/08/swift-sanctions-ukraine-russia-nato-putin-war-global-finance/
[5]https://www.cfr.org/backgrounder/what-iran-nuclear-deal
[6]https://www.aljazeera.com/economy/2018/11/5/what-swift-is-and-why-it-matters-in-the-us-iran-spat
[7]https://www.imf.org/en/News/Articles/2024/05/07/sp-geopolitics-impact-global-trade-and-dollar-gita-gopinath
[8]https://www.reuters.com/article/us-usa-nord-stream-2-sanctions-exclusive-idUSKBN29I0CN/
[9]https://jamestown.org/program/russia-builds-alternative-to-swift-as-part-of-digital-sovereignty-push/
[10]https://cbr.ru/collection/collection/file/49165/rb_2023.pdf?utm
[11]https://interfax.com/newsroom/top-stories/98475/
[12]https://home.treasury.gov/news/press-releases/jy2725
[13]https://www.npci.org.in/what-we-do/upi/product-overview
[14]https://www.reuters.com/markets/asia/india-four-se-asia-countries-plan-instant-retail-cross-border-payments-2024-07-01/
[15]https://www.reuters.com/technology/india-payments-authority-eyes-africa-s-america-digital-payment-push-official-2024-09-24/?utm
[16]https://eng.yidaiyilu.gov.cn/p/86739.html
[17]https://eng.yidaiyilu.gov.cn/p/86739.html
[18]https://www.swift.com/news-events/press-releases/swift-offers-secure-financial-messaging-services-cips
[19]https://cdn.brics-russia2024.ru/upload/docs/BRICS_FMCBG_Statement.pdf?1728665606116285
[20]https://www.ledgerinsights.com/bis-hands-over-mbridge-cbdc-payment-system-after-brics-controversy/
[21]https://www.jpost.com/business-and-innovation/precious-metals/article-822549
[22]https://www.bbc.com/news/articles/cgrwj0p2dd9o
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