In News:

The BRICS grouping - Brazil, Russia, India, China and South Africa - has intensified efforts to operationalise “BRICS Pay,” a cross-border payment system designed to reduce dependence on the U.S.-dominated SWIFT network. This initiative reflects a broader push by emerging economies to assert financial sovereignty, insulate themselves from unilateral sanctions, and reshape the global financial architecture towards multipolarity.

Background: Evolution of BRICS Financial Cooperation

The foundations of BRICS’ financial cooperation were laid at the Fortaleza Summit (2014) with the creation of two landmark institutions—the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA). These were the first multilateral financial institutions set up by developing countries to offer alternatives to Western-dominated bodies such as the IMF and World Bank.

The momentum intensified after Western sanctions on Russia in 2014 and again in 2022, which exposed the vulnerability of nations dependent on dollar-centric financial systems. By 2017, BRICS members formally agreed to enhance local currency settlements, currency swaps, and financial coordination. This gradual evolution culminated at the Kazan Summit (2024), where leaders launched the BRICS Cross-Border Payments Initiative (BRICS Pay).

What is BRICS Pay?

BRICS Pay is the most concrete step taken by the bloc to challenge the SWIFT system, a Belgium-based financial messaging network used by over 11,000 banks worldwide and influenced largely by G-10 central banks. The system has often been criticised for enabling the weaponisation of finance through sanctions.

BRICS Pay seeks to:

• Enable cross-border settlements in local currencies
• Strengthen correspondent banking networks within BRICS
• Provide a sanctions-resilient payment mechanism
• Reduce transaction costs and settlement delays in intra-BRICS trade

A prototype of BRICS Pay was demonstrated in Moscow in October 2024, marking a technological and political milestone.

Technological Backbone: National Payment Systems

Each BRICS country already possesses a robust domestic digital payment infrastructure, forming the technological base of BRICS Pay:

• India – Unified Payments Interface (UPI)
• China – Cross-Border Interbank Payment System (CIPS)
• Russia – System for Transfer of Financial Messages (SPFS)
• Brazil – Pix Instant Payment System
• South Africa – South African Multiple Option Settlement (SAMOS)

The BRICS Payments Task Force (BPTF) is working to ensure interoperability among these systems, a prerequisite for creating a cohesive alternative to SWIFT.

Strategic Motivations Behind BRICS Pay

The push for BRICS Pay is driven by three interlinked objectives:

• Financial Sovereignty: Reducing exposure to the U.S. dollar and Western sanctions, particularly relevant after Russia and Iran faced prolonged financial isolation.
• Economic Efficiency: Facilitating faster, cheaper trade settlements among BRICS members, especially in energy and commodities.
• Geopolitical Assertion: Signalling the emergence of BRICS as a counterweight to Western economic dominance.

The inclusion of Iran into BRICS in 2024, a country long excluded from SWIFT, reinforced the bloc’s intent to create a sanctions-proof financial ecosystem.

Challenges to Implementation

Despite its promise, BRICS Pay faces significant constraints:

• Divergent National Interests: Each country is simultaneously promoting its own payment system globally. India’s UPI is expanding in Asia and Africa, while China’s CIPS operates in over 120 countries.
• Interoperability and Regulation: Integrating multiple payment platforms requires harmonised legal, cybersecurity, and regulatory standards.
• Currency Coordination Issues: The absence of a common BRICS currency limits seamless settlement. A unified currency would demand deep macroeconomic convergence, as seen in the prolonged evolution of the Euro.
• Trust Deficit: Smaller members may fear Chinese financial dominance, given the internationalisation of the yuan and its inclusion in the IMF’s Special Drawing Rights (SDR) basket.

Global Reactions and Implications

The initiative has triggered sharp geopolitical reactions. Former U.S. President Donald Trump threatened 100% tariffs on BRICS members if they attempted to undermine the U.S. dollar, highlighting the strategic sensitivity of the move.

If operationalised even at a regional level, BRICS Pay could:

• Accelerate de-dollarisation in global trade
• Provide developing nations an alternative financial channel
• Promote a multipolar global financial order

However, most analysts agree that BRICS Pay is more likely to complement SWIFT rather than replace it, at least in the near term.

Conclusion

BRICS Pay represents a strategic experiment rather than an immediate disruption of the global financial system. Its success will depend on sustained political will, technical integration, and trust among members. Even partial success—limited to intra-BRICS trade—would mark a significant shift in global finance, signalling that economic power is no longer unipolar but increasingly distributed. For India, BRICS Pay offers both opportunities and challenges, requiring a careful balance between promoting UPI globally and safeguarding strategic autonomy within the bloc.