Overview of the BRICS Payment Initiative
The 18th BRICS summit will be hosted by India in September 2026. A key agenda item is creating a cheaper, faster way for member countries to settle trade payments without relying on the U.S. dollar or the traditional SWIFT network.
Key Developments
- Finance ministries and central banks of the five members met in Jaipur (12‑13 August 2026) to discuss financial cooperation and the use of national currencies in trade.
- Proposals include linking each country’s CBDC on a common settlement platform.
- India has suggested a bilateral link between its UPI and Singapore’s PayNow as a pilot, but a multilateral hub is being explored.
- The BIS‑led mBridge prototype is operational, but a BRICS‑specific system called “BRICS Clear” remains under study.
Important Facts on Current Cross‑Border Payments
Today, a payment from a South African importer to an Indian exporter moves through a chain of correspondent banks. Because few banks hold both rupee and rand accounts, the transaction is routed via a major bank in London or New York, converting rand to dollars and then dollars to rupees. The dollar acts as a “vehicle currency” even though no U.S. party is involved.
Each intermediary levies a fee and applies a foreign‑exchange margin. A 2019 BRICS survey showed margins of 2.5 % in Brazil rising to 8.5 % in Africa and sometimes exceeding 20 %. Although SWIFT has introduced the Global Payments Innovation to speed up settlements, the network of correspondent banks shrank by 20 % between 2011 and 2018, according to the BIS.
Exam Relevance
Understanding the limitations of the existing payment architecture is crucial for GS 3 (Economy) questions on international finance, trade, and digital currencies. The move toward a multilateral CBDC settlement system touches upon:
- Monetary sovereignty – reducing exposure to external monetary policy.
- Financial inclusion – faster, cheaper cross‑border remittances for trade and tourism.
- Geopolitics – how emerging economies seek alternatives to dollar‑centric systems.
These themes also appear in GS 1 (International Relations) when analysing the strategic motives of the BRICS bloc.
Way Forward
For the 2026 summit, member states are likely to:
- Finalize technical standards for CBDC interoperability.
- Decide whether a shared hub (similar to Project Nexus) or a bilateral‑by‑bilateral approach will be pursued.
- Address regulatory and sanctions concerns that have hampered earlier alternatives, especially after the 2022 exclusion of Russian banks from SWIFT.
Successful implementation could lower transaction costs by up to 50 % and speed settlement to near‑real‑time, giving India and other members a strategic edge in global trade.