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News: The BRICS Summit discussed increasing trade and payments in national currencies amid efforts to develop alternatives to the SWIFT system.
About SWIFT Payment System
- ‘SWIFT’ stands for the ‘Society for Worldwide Interbank Financial Telecommunication’.
- It is a messaging network used by banks and financial institutions to exchange information on financial transactions.
- It does not hold or transfer money or securities.
- Global Reach: It connects more than 11,000 banking and securities organizations in over 200 countries and territories.
- Headquarter: Its headquarters is in Belgium.
- Working Mechanism: Each participant is assigned a unique eight-digit SWIFT code or Bank Identification Code (BIC).
- The sending bank uses this code to send a SWIFT message to the beneficiary’s bank.
- After the message is received and approved, the money is credited to the required account.
- Governance:
- Ownership and Control: It is owned and controlled by its shareholders.
- Board: Shareholders elect a 25-member Board of Directors to govern and oversee the company.
- Oversight: It is overseen by G-10 central banks and the European Central Bank (ECB), led by the National Bank of Belgium.
- SWIFT Oversight Forum: It was established in 2012.
- It brings the G-10 central banks together with the central banks of India, Australia, Russia, South Korea, Saudi Arabia, Singapore, South Africa, Türkiye and China.
Alternatives of SWIFT
Project mBridge
- The Project mBridge comprises the Bank of Thailand, Central Bank of the UAE, Digital Currency Institute of China, Hong Kong Monetary Authority, and Saudi Central Bank.
- Purpose: It is a multi-Central Bank Digital Currency (CBDC) platform designed for cross-border payments through direct peer-to-peer CBDC settlement.
- Technology: The project developed the mBridge Ledger, a blockchain for multi-currency cross-border CBDC payments.
- Status: It attained minimum viability status in 2024.
Cross-Border Interbank Payment System (CIPS)
- TheCross-Border Interbank Payment System (CIPS) is backed by the People’s Bank of China.
- Purpose: China launched it in 2015 to internationalise yuan use.
- Working: It allows global banks to clear cross-border yuan transactions directly onshore.
- Reach: It has participants in more than 120 countries, including all BRICS members except India.
System for Transfer of Financial Messages (SPFS)
- TheSystem for Transfer of Financial Messages (SPFS) was developed by Russia in 2014.
- Purpose: It was developed to bypass Western sanctions.
- Growth: 50 new entities joined the system in 2023, taking the total to 440.
- Participation: More than 100 participants were non-residents.
SEPAM (System for Electronic Payments Messaging)
- The SEPAMA is Iran’s local interbank telecom system.
- Connectivity: It has 52 branches of Iranian banks and four unnamed foreign banks connecting with 106 banks using SPFS.
