Since the start of the special military operation (SMO), and the the disconnection of numerous Russian banks from the global SWIFT interbank telecommunications system, a number of significant market players have moved to the development of their own national payment systems. These are being created with the objective of integrating them into the global economy and connecting them to other foreign payment systems.
The shift away from the dollar in international trade, particularly evident between developing economies, has accelerated the transition of individual countries to settlements in national currencies. This has created a need for new instruments for export-import deliveries, including those operating in digital form.
China provides an excellent case in point, having launched the Cross-Border Interbank Payment System (CIPS) in 2015. Russia has been utilising its own Financial Messaging System (CFPS) since 2014, while India has been employing the Unified Payment Interface (UPI) since 2016. In addition to the objective of establishing autonomous national systems of settlements and payments, the creation of such systems is driven by the desire to reinforce the positions of their national currencies in global financial markets.
The Indian UPI system offers several advantages, including a digital public infrastructure that provides a simple payment process via QR code, making it a popular choice for even the smallest purchases across the country. This system integrates 300 banks and financial transactions are carried out through mobile applications (like Google Pay), which ensures high mobility of operations and increased demand for the system.
In addition to settlements, this interface allows for the quick transfer of money from one bank account to another, facilitating transactions not only between individuals but also between companies. In 2023, the number of transactions carried out using UPI exceeded 100 billion, with a turnover of 2 trillion euros.
Furthermore, India is developing a global payment system with RuPay cards, which will be interchangeable with cards from other countries (as demonstrated by the recent collaboration with the UAE). This will lead to a notable increase in transactions between countries and via e-commerce channels. It is worth noting that tourists from India are already able to utilise UPI interfaces to make purchases in a number of countries. India has entered into special memoranda with 13 countries that are interested in implementing UPI.
Consequently, India (as China is actively doing) is strengthening its global influence in the form of a powerful payment system of its own, thereby becoming an increasingly serious counterweight to SWIFT, while not abandoning it. In the area of card payments, Indian RuPay cards are entering into intense competition with the well-established Visa and Mastercard.
Since 2022, when there was a sharp increase in Russian-Indian trade, and Russia lost access to SWIFT, there has been a growing need for alternative payment instruments. Initially, Indian importers paid for Russian oil in dirhams (if the delivery was through Dubai traders) or in rupees (for direct deliveries). In light of these circumstances, it became imperative for Russia to integrate with the payment mechanisms of its foreign partners in order to reduce its traditional dependence on the dollar.
Russia and India are currently engaged in active discussions regarding the organisation of interaction between their respective national payment systems. This will facilitate the mutual acceptance of Russian MIR cards and Indian RuPay. It should be noted that this interaction is not intended to eliminate distortions in mutual trade, as was the case as a result of the large balance of Indian rupees accumulated in special Vostro accounts due to the significant excess of Russian exports to India over its imports. The issue has now been resolved, as Russian organisations are permitted to invest the rupees they receive from imports from India in a range of sectors, areas and industries.
The integration of payment systems is necessary due to the sharp growth of Russian-Indian trade. Russia has become the second most important importer for India, after China, having already overtaken the United States. It is therefore essential to streamline, adjust and provide effective payment and settlement mechanisms for this trade.
Indeed, the integration of the Russian and Indian payment systems will result in the formation of a reliable alternative to SWIFT, which will mark the beginning of the end of its global dominance. The formation of such bilateral mechanisms will be accelerated by the introduction of central bank digital currencies, which will significantly simplify the compatibility of different national payment systems. At this stage, there are no significant technical challenges. The key to success is political will and the willingness of countries like India to avoid getting caught up in the sanctions rhetoric of Western countries.