BRICS Alternatives to SWIFT: CIPS, SPFS, mBridge and CBDC Payments

Subject: GS Paper 3: Indian Economy

Context: BRICS countries are exploring alternatives to SWIFT for cross-border payments amid concerns over dependence on dollar-based financial systems and the growing use of financial sanctions.

• BRICS CBDC Linkage Proposal: India reportedly explored the possibility of linking CBDCs across BRICS for cross-border payments, although the proposal was not included in the final Declaration.
• India–Russia CBDC Settlements: Russia’s Sberbank highlighted the potential for CBDC-based trade settlements between India and Russia, citing greater efficiency.
• India–Russia Trade Settlement Mechanism:
  • Local-Currency Settlement: Bilateral trade is increasingly settled in Indian rupees and Russian roubles, which reportedly account for 96% of bilateral trade.
  • Banking Network: 22 Russian banks and 17 Indian banks currently facilitate bilateral trade payments.

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About SWIFT

• SWIFT (Society for Worldwide Interbank Financial Telecommunication) is a global messaging network that enables banks and financial institutions to securely exchange information about international financial transactions.
  • SWIFT is a messaging network; it does not itself transfer money. 
• Established: 1973, in Brussels, Belgium.
• Core Functions:
  • Messaging: Exchange of structured messages relating to payments, securities, trade finance and banking operations.
  • Standardization: Maintains messaging standards for uniformity and compatibility by using standard formats such as SWIFT MT and ISO 20022.
  • Security: Safeguards the confidentiality, integrity and authenticity of messages.
• SWIFT Codes: Help identify the financial institution involved in a transaction. 

Need For Alternatives To SWIFT

• Financial Sanctions: Exclusion from established financial networks can disrupt a country’s international trade and payments.
• Dollar Dependence: Countries are seeking greater use of national currencies in bilateral trade.
• Geopolitical Conflicts: Multiple conflicts have increased concerns about dependence on existing global financial infrastructure.
• Payment Resilience: Alternative systems can provide additional channels for conducting cross-border transactions.

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Major Alternatives To SWIFT

• Cross-Border Interbank Payment System (CIPS): 
  • Launched: China launched CIPS in 2015.
  • Institutional Backing: Backed by the People’s Bank of China (PBoC).
  • Core Function: Facilitates cross-border yuan-denominated transactions.
  • Strategic Objective: Promotes the internationalisation of the renminbi.
  • Global Reach: Has participants across more than 120 countries, according to the article.
• System For Transfer of Financial Messages (SPFS):
  • Developed by: Russia developed SPFS in 2014.
  • Core Objective: Reduce dependence on Western financial messaging infrastructure.
  • Post-2022 Role: Became particularly important after several Russian banks were excluded from SWIFT in 2022.
  • International Linkages: Have expanded beyond Russia and are linked with Iran’s SEPAM.
  • Growing Participation: Russia reported that the system had around 440 participants, including more than 100 non-residents.
• Project mBridge: It is a multi-CBDC platform designed for cross-border settlement using central bank digital currencies.
  • Participating Jurisdictions: Includes China, Hong Kong, Thailand, the UAE and Saudi Arabia.
  • mBridge Ledger: Developed a blockchain-based ledger for multi-currency CBDC transactions.
  • Settlement Model: Enables direct peer-to-peer settlement between participating institutions.
  • Key Objective: Seeks to reduce reliance on correspondent banks in cross-border transactions.

Performance Of Alternative Payment Systems

• CIPS: CIPS has expanded particularly among China’s Asian and African trading partners.
  • It processed an average of 679.8 billion yuan per day in 2025, according to the article.
  • However, its scale remains considerably smaller than established global payment systems.
  • Its internationalisation is closely linked to the growing use of the renminbi.
• SPFS: SPFS expanded rapidly after Russia faced Western sanctions.
  • Russia reported that 50 new entities joined in 2023, taking the total participants to around 440, including more than 100 non-residents.
  • Its linkage with Iran’s SEPAM has expanded its cross-border utility.
• mBridge: Achieved minimum viable product status in 2024.
  • The BIS exited the project in October 2024 after supporting it since 2019.
  • Its development demonstrates the potential of multi-CBDC settlement, but also highlights geopolitical and institutional challenges.

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News Source: The Hindu

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