China consistently ranks among the leading positions among the world’s countries in economic level and development rapidity. The yuan is one of the five most widely used payment currencies. As for the payment industry, the country was one of the first to introduce payments with QR codes massively. The AliPay system is comparable to the global Apple Pay for daily transactions.
WHAT IS CIPS?
The share of the Chinese national currency in international payments continues to grow. Will the yuan become the world’s leading currency?
China is actively developing a Cross-Border Inter-Bank Payment System (CIPS). The system is not new; it was created back in 2015, but in recent years, it has been gaining popularity, forming new rules of the global finance game.
CIPS offers clearing and settlement services for its members in cross-border payments and trading in yuan without intermediate conversions, speeding up settlements and reducing transaction costs.
CHALLENGING TO SWIFT?
Despite the fact that for banks participating in CIPS, it appears as an alternative to SWIFT, it is incorrect to compare these systems. CIPS is a payment system that performs messaging functions, and SWIFT is a messaging network banks and other financial institutions use.
CIPS aims for effective cooperation; the system uses SWIFT as a message delivery service and supports the ISO 20022 standard but only works with RMB. CIPS essentially provides access to the internal clearing system CNAPS2 (China’s national electronic payment system) for cross-border RMB payments. Previously, payments for cross-border settlements in yuan were made through clearing and correspondent banks.
HOW TO CONNECT?
CIPS participants are divided into direct and indirect. The first can open accounts with CIPS, and the second can access through direct participants. Only residents of China and their subsidiaries can obtain the status of a direct participant in the system.
As of January 2023, 53 participants were directly connected to the system and 1,137 indirectly. Among indirect participants, 876 are from Asia (including 527 from the Chinese mainland), 153 are from Europe, 42 are from Africa, 26 are from North America, 23 are from Oceania, and 17 are from South America. In total, the system covers more than 4,400 banking institutions in 182 countries.
To connect to CIPS successfully, banks must adapt work processes in accordance with the system requirements. The SOLAR platform will help you prepare the infrastructure for interaction with CIPS ASAP.
The yuan is an important payment currency worldwide, and the share of payments in yuan is increasing every year. Financial institutions’ interest in the project is growing, and it already unites almost all countries and many banking networks.
CIPS demonstrates the benefits and potential to further expand the participant’s network. It is possible that CIPS will become one of the integral elements of the financial world model of the future.
