BRICS Pay – Legitimate Challenge or Doomed to Fail?

November 2024

Fintech & Payments

Nick Maynard

VP of Research

Following the BRICS summit that was held in Russia in late October 2024, the concept of BRICS Pay has again moved into the spotlight. BRICS Pay is a proposed international payments system being created by a consortium of BRICS members, to rival the dominance of the US dollar in international payments. Russian President Vladimir Putin called directly for the system to be developed and implemented at the summit, to prevent “the dollar being used as a weapon.”

Why The Need for an Alternative?

For some time, the US dollar has been the default instrument for international payments, given the US economy’s importance to the world in terms of trade. A significant volume of all cross-border payments is carried via SWIFT; a messaging network that initiates international payments.

The challenge that certain countries, such as Iran and Russia have faced is that when international sanctions led by the US are applied, this can restrict access to the SWIFT system and other international payment systems, which can have a highly disruptive impact on the economies involved. For example, after the Russian invasion of Ukraine, Visa and Mastercard payment systems were switched off within Russia; creating difficulties.

The risk therefore with the current international payment framework is that it is subject to political considerations within Western countries, which will be seen as undesirable and a restriction on the sovereignty of many countries.

How Would BRICS Pay Work?

BRICS Pay would be built around the concept of financial sovereignty; creating an alternative system that cannot be switched off or restricted by the US or EU.

The concept is to create a fully independent network of financial institutions for cross-border payments; enabling BRICS members to conduct trade without interruptions. The envisioned system would include an interoperable retail QR code payments system, a B2B payments system, a cryptocurrency, a loyalty system for tourism and an international digital system for the settlement of cross-border securities. 

What Prospects Does BRICS Pay Face?

Challenging the established cross-border payments system with a completely new framework is a daunting challenge. SWIFT is well established; connecting over 200 countries and territories, and connecting over 11,000 institutions.  Scaling a competitor will require a significant amount of effort to build a system. This will include rolling out solutions to a large number of members, and testing functionality with a broad range of payment systems and banking software stacks. From a technical standpoint, this is challenging. 

From a political standpoint as well, there are formidable challenges. BRICS is not entirely aligned as a group with the objective for reducing the importance of the dollar. Brazil and India in particular have expressed reservations around the system. This is unsurprising, given that these economies, which are experiencing rapid growth, have strong economic ties to the US and Europe. Creating BRICS Pay solely to pursue an anti-Western strategy and to embolden Russia and China is not in the interest of these countries, particularly for India, which has its own geopolitical challenges with China. 

Therefore, getting off of the ground with a system will be a challenge, particularly one involving all BRICS members, from both a political and technical point of view. 

However, the task is not impossible. The current cross-border payments landscape is quite challenging, with cross-border transactions being slow, expensive and difficult to track. Even outside of the sovereignty argument, there is genuine enthusiasm for alternative cross-border solutions. The countries involved represent 26% of global GDP (USD$ Current), meaning that there is a significant opportunity to address.

Rapid economic growth in these countries will mean that these opportunities will continue to grow. This will be particularly important as BRICS looks to expand, with the inclusion of a further group of countries which are shortly going to be added to BRICS, including Cuba, Bolivia, Thailand, Vietnam, Malaysia, Indonesia, Belarus, Turkey, Nigeria, Uganda, Kazakhstan and Uzbekistan. 

What Can We Expect?

Fundamentally, the value of an alternative cross-border payments system for BRICS is high, so we do expect a viable system to emerge eventually. However, given the different countries and political goals involved, we anticipate that the process of implementing the system will be torturous. We also anticipate that many of the countries involved would only selectively use the systems, limiting its immediate impact.

What is clear however, is that as the sovereignty of payments only grows in importance, we will see greater than ever interest in alternative payment systems to challenge the established order.