BRICS Cross-Border Payment Cooperation: Its Impetus, Paths and Challenges

As cross-border trade and investment continue to grow and the geopolitical rivalry becomes ever more intense， cross-border payment becomes one of the topical issues for the BRICS countries to reform the global economic governance system. BRICS cross-border payment cooperation is directly due to the flaws in traditional cross-border payment system， namely， high cost， low efficiency， opaque transactions， high security risks and weaponization. The BRICS countries are committed to improve the global cross-border payment governance system and their cooperation on it follows two paths： a security-oriented path with anti-sanctions as its core and a development-driven path centered on promoting cross-border trade and investment. Although BRICS Bridge proposed by Russia makes a decentralized cross-border payment system possible， it still faces problems and challenges such as different interest demands of different member states and lagging development of blockchain technology.

The Flaws in Traditional Cross-border Payment Systems

Based on the technology used， cross-border payment systems can be divided along a traditional and digital line. At present， the dominant payment system runs on agent bank model， which means that a commercial bank opens a clearing account in an overseas agent bank， sends cross-border messaging mainly through the SWIFT channel， and completes cross-border payment and clearing through the payment and clearing system of the agent bank. In recent years， with the upgrading of emerging blockchain technology and distributed ledger technology， countries have begun to explore digital currency payment systems， which are quite different from the traditional systems in technology， application model and supervision.

The traditional systems under the agent bank model have such technical flaws as high cost， low efficiency， opaque transactions and high security risks. First， the cost is high. Under this model， cross-border payments need to go through settlement， clearing， reconciliation， SWIFT channel and many other links， each involving cost expenditure. In recent years， as the global efforts against money laundering and terrorist financing continue to ramp up， the compliance costs incurred on banks to meet regulatory requirements have increased significantly. Second， the efficiency is low. A cross-border payment needs to be completed jointly by the agent bank and the domestic payment and clearing system， making the payment chain long. Moreover， the payment and clearing systems in different countries have different operating hours， which makes it hard to achieve timely clearing. Third， its use is in decline. Between 2011 and 2018， the number of global agent banks dropped by about 20%， further reducing the availability of financial services. Fourth， security risks are high. Due to the long business chain and the involvement of multiple regions and currencies， the traditional system is hard to put under regulation and thus prone to security risks. More importantly， in the context of heightened geopolitical risks， the traditional system is at risk of being weaponized and used as tools of sanctions. Hegemonic powers can use their special advantage in the cross-border payment system to impose financial sanctions on other countries， which may hamper the latter’s financial security. Under the agent bank model， information flow and fund flow are independent of each other. The messaging system represented by SWIFT and the currency-based payment and clearing system of different countries constitute cross-border payment system. In terms of information flow， SWIFT， as the world’s most important channel for cross-border financial messaging， covers more than 200 countries and regions in the world， supports real-time payment and clearing systems in more than 90 countries and regions， and provides services to more than 11，000 financial institutions around the world. Despite SWIFT’s positioning as a neutral and professional international organization providing financial communication services to financial institutions， the U.S. rachets up efforts to weaponize it. After the 9/11 terrorist attacks， the U.S. has gradually tightened its control over SWIFT in the name of anti-terrorism， and gained access to cross-border payment information of other countries through SWIFT.

In addition to information flow， the U.S. continues to use its dollar monopoly in capital flow to impose financial sanctions on others. As the dominant international payment currency， the U.S. dollar has the largest share of SWIFT’s business. At present， about 95% of the world’s cross-border dollar transactions are dominated by the New York Clearing House Interbank Payment System （CHIPS）. Leveraging the CHIPS and SWIFT， the U.S. carries out long-arm jurisdiction in cross-border payment system by controlling both messaging and currency payment， putting the financial security of other countries at risk.

Paths for BRICS Cross-Border Payment Cooperation

With a view to addressing the flaws in traditional cross-border payment systems， the BRICS countries， as an important force to reform and improve the global governance systems， put cross-border payment cooperation on the agenda of the BRICS Summit. At present， there is consensus within BRICS on such cooperation， but views differ on what cooperation path to adopt. Generally speaking， there are two different paths. One is the security-oriented path. This path focuses on enhancing financial security， preventing and coping with the weaponization of cross-border payment systems， and strengthening cooperation against financial sanctions. The other is the development-driven path. It focuses on providing stable and reliable financial infrastructure， reducing cost， improving efficiency， and strengthening cross-border payment cooperation for promoting cross-border trade， investment and economic development among countries.

Countries that advocate a security-oriented path are represented by Russia and Iran. Both countries have faced financial sanctions imposed by Western countries， and both created their own cross-border payment systems in order to maintain financial security after being threatened. For Russia， in the aftermath of the Crimea crisis in 2014， the U.S. and Europe repeatedly threatened to cut off Russia’s contact with SWIFT， resulting in big fluctuations in Russia’s macro economy. In 2014， Russia drafted legislation to develop the System for Transfer of Financial Messages （SPFS）. As of January 2024， more than 550 financial institutions from 20 countries have joined the SPFS. For Iran， the U.S. intensified its financial sanctions on it in March 2012， leading to SWIFT cutting ties with more than 30 important Iranian financial institutions under U.S. pressure. In 2018， the Trump administration unilaterally withdrew from the Joint Comprehensive Plan of Action， and SWIFT kicked out Iranian financial institutions once again. In 2019， the Central Bank of Iran officially launched the System for the Exchange of Financial Messages of Iran （SEPAM）.

Functionally， the SPFS and SEPAM system were developed as alternatives to SWIFT， with the core goal of preventing financial sanctions and maintaining financial security. After the SPFS was officially put into use， Russia used carrot and stick to attract domestic financial institutions to join. At the international level， Russia tried to draw financial institutions of various countries over to the SPFS. In 2023， the central banks of Russia and Iran signed an agreement to link the SPFS with the SEPAM， connecting the Iranian domestic banking network with Russian and foreign banks in the SPFS system.

Unlike the security-oriented path， China’s Cross-Border Interbank Payment System （CIPS） follows a development-driven path. The CIPS is designed to follow the pace of RMB internationalization and provide sound infrastructure for RMB cross-border payment settlement， so as to further facilitate the development of cross-border trade and investment between China and other countries. In order to meet the need for RMB cross-border use， further integrate the existing channels and resources of RMB cross-border payment and settlement， and improve its efficiency， the People’s Bank of China decided to build a RMB cross-border payment system in early 2012. In March 2016， CIPS and SWIFT signed a memorandum of cooperation to cooperate on messaging conversion， enabling overseas brokerage institutions to handle RMB settlement through SWIFT by connecting CIPS to SWIFT’s global user base. At present， the CIPS and SWIFT are more of complementary and collaborative， without clear traits of one replacing the other.

The Content， Advantages and Challenges of BRICS Bridge

Since January 2024， Russia took over the rotating BRICS presidency， and five countries of Saudi Arabia， Iran， the UAE， Egypt and Ethiopia joined the BRICS cooperation mechanism. In late October of the same year， the 16th BRICS Summit was held in Kazan， Russia. Leaders of more than 30 countries and heads of international organizations attended the “BRICS Plus” Leaders’ Dialogue during which President Xi Jinping delivered an important speech， marking the official launch of Greater BRICS Cooperation. Russia’s officially released The Priorities of the Russian Federation’s BRICS Chairmanship in 2024 listed cross-border payment cooperation as one of the key topics at the Kazan Summit， and proposed the specific cooperation initiative of BRICS Bridge. While no consensus was reached at the Summit on how to cooperate on cross-border payment， BRICS finance ministers and central bank governors have been mandated to conduct further research work and to submit report at the 2025 BRICS Summit. Therefore， it is important to study the content， advantages and challenges of BRICS Bridge， in order to catch on to the trajectory of cross-border payment cooperation within BRICS as well as the greater BRICS cooperation.

I. The Content of the BRICS Bridge Initiative

BRICS Bridge is a concrete initiative proposed by Russia for greater BRICS cross-border payment cooperation. In March 2024， Yury Ushakov， Aide to President Putin for Foreign Policy， said in an interview with TASS that the BRICS countries plan to create a cross-border payment system based on digital currencies and blockchain. In June 2024， Russian Finance Minister Anton Siluanov said at the St. Petersburg International Economic Forum that Russia proposed to create a common platform for the exchange of digital financial assets which would be issued by central banks based on their national currencies. BRICS finance ministers are studying the feasibility of launching such a platform. In the same month， Russian Deputy Finance Minister Ivan Chebeskov once again revealed to the media that Russia is studying the launch of a local currency settlement and payment platform named BRICS Bridge together with the central banks of the BRICS member states. In July 2024， Russian Ambassador to China Igor Morgulov said when attending the 12th World Peace Forum in Beijing that BRICS countries are working on developing a financial system that is not controlled by any third party.

In general， BRICS Bridge is a digital cross-border payment cooperation system that is security-oriented and based on fairness， non-discrimination， transparency and decentralization.

II. The Advantages of the BRICS Bridge Initiative

Compared with the traditional cross-border payment system， the BRICS Bridge， based on digital currency and blockchain technology， makes a decentralized cross-border payment system possible while giving emerging economies and developing countries greater development space.

First， compared with the traditional system under the agent bank model， the transaction chain of the digital cross-border payment system is more convenient， which can shorten transaction time and reduce transaction cost. On the one hand， digital cross-border payment system uses distributed ledger technology to provide a directly connected network for central banks， commercial banks and commercial participants， leaving out the link of agent banks that exists in traditional system. On the other hand， digital cross-border payment system can exert privacy controls on core transaction data through pseudonym systems， helping to ensure data confidentiality and improve anti-hacking capabilities.

Second， digital cross-border payment system makes it possible to decentralize transactions and help guarantee the financial security of countries and the independence of cross-border payments. By adopting blockchain technology， the digital system sets up a structure without a central node and addresses the problem of over concentration of information. At the same time， it enables the simultaneous transfer of both information flow and financial flow， which can help countries reduce or even avoid the use of U.S. dollar.

Third， there hasn’t been in place unified governance rules on digital cross-border payment system， giving emerging economies and developing countries more room for development. As many countries are exploring cross-border payment systems based on the central bank digital currency. If some country or group of countries can take the lead in launching such a system that is well functional and widely used to some degree， it will gain a first-mover advantage.

III. The Challenges facing the BRICS Bridge Initiative

Certain challenges are facing the BRICS Bridge initiative at current stage. On the one hand， it needs to address the problems of different interests and needs of different member states， regulatory policy coordination and the lagging development of blockchain technology within the BRICS countries.

First， the interests of different member states vary greatly. Although the BRICS countries have reached consensus on strengthening cross-border payment cooperation， there are still differences on which cooperation path to follow in order to build BRICS Bridge. Russia advocates the security-oriented path for anti-sanctions purpose， while some others advocate the development-driven path.

Second， regulatory policy coordination is no walk in the park. On the basis of ensuring the existing rights of all participants， Russia proposes the formation of a joint governing body to decide on the legal framework， development strategy， operational mechanism， information protection standards and security compliance system of BRICS Bridge. At present， there are still big differences in the promotion， application and regulatory policies of digital currency in the BRICS countries， with some even lacking a digital currency platform and relevant laws. This makes BRICS Bridge inevitably face a long way ahead in terms of regulatory policy coordination.

Last， blockchain technology is lagging behind. BRICS Bridge should not only meet the need of huge trading volumes， but also ensure the efficiency of data transmission， the accuracy and scalability of data processing， as well as security and privacy. Blockchain technology is still unable to deal with the risk of foreign exchange management， illegal transactions and asset loss in cross-border payments， making it difficult to be applied to cross-border payments of digital currencies in the short term.

On the other hand， BRICS Bridge also faces outside challenges including political pressure from the U.S. and the West， market recognition， and competition with other digital currency cross-border payment systems.

First， political pressure from the U.S. and the West. BRICS Bridge aims for de-dollarization， by which it can circumvent financial sanctions imposed by the U.S. and the West through SWIFT. This will undoubtedly pose a challenge to the U.S. dollar-centered international financial system， and will surely be met with strong objection and suppression by the U.S. and the West.

Second， the pressure of market recognition. BRICS Bridge regards as its core the transaction of digital assets， the establishment of digital credit， and the improvement of digital services， which not only requires the development of digital infrastructure， but also the high recognition from the international market. At present， in most of the BRICS countries， market accepts cash payments and bank transfers more than others， and it will take quite long to build digital credit.

Last， the pressure from competition with other digital currency cross-border payment systems. Western developed countries such as the U.S.， Europe and Japan have cooperated on central bank digital currency research and development， trying to dominate digital currency standards， and establish a common regulatory framework for digital currencies to prevent countries such as Russia from evading financial sanctions through digital currencies. Some Western researchers even point out that， even if BRICS countries establish their digital cross-border payment system， there will still be a need to exchange their national or digital currency into dollars at a clearing house located in Hong Kong， and the U.S. can impose sanctions during that process.

In conclusion， the BRICS countries have a strong impetus for cross-border payment cooperation， which is not only due to the flaws in traditional cross-border payment systems， but also related to the reckless use of such systems as a tool of economic sanctions by the U.S. and the West in the context of strategic competition among major countries. However， BRICS is still exploring ways to carry out such cooperation， with options of a security-oriented path and a development-driven path. From a historical point of view， BRICS cross-border payment cooperation will certainly help to reform and improve the global cross-border payment governance system in a gradual， pragmatic， open and transparent way.

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Zhu Jiejin is Professor of the School of International Relations and Public Affairs at Fudan University