BRICS Pay is a payment system initiative developed by the BRICS countries (Brazil, Russia, India, China and South Africa) to facilitate cross-border transactions between them.
The main goal of BRICS Pay is to bypass traditional financial infrastructures, especially those dominated by the US dollar and Western financial institutions, thereby promoting financial independence within the BRICS bloc.
The initiative is part of a larger goal to reduce dependence on existing financial systems, such as SWIFT, which are vulnerable to sanctions and interference from Western countries.
The combined GDP of the BRICS countries is expected to exceed $26 trillion by 2024, accounting for about 36.7% of the global economy. This means that if BRICS Pay is widely adopted across these economies, it could dramatically change the global trade landscape, reducing the need for intermediate currencies and reducing the costs associated with currency conversion and dollar-based transactions.
The political and economic roots of BRICS Pay
The motivation behind BRICS Pay is both economic and political, and it all comes back to the issue of US dollar dominance.
For decades, the US dollar has been the world’s primary reserve currency, meaning that most international trade and financial transactions are based on it. This gives the US enormous influence in global financial transactions. At the same time, it also leaves other countries vulnerable to sanctions or economic policies that may not be in their interests.
For the BRICS countries, this reliance on the dollar becomes a double-edged sword. Economically, they are major players with growing influence, but they are still bound by a system where the dollar is the central player.
If the US decides to impose sanctions, as it has done with Russia in recent years, it can restrict access to international financial systems like SWIFT and freeze dollar transactions. This puts countries at risk of economic disruption and limits their financial autonomy.
BRICS Pay is more than just a payment system; it is a way to avoid these risks. By creating a direct payment channel where local currencies can be used instead of relying on dollars, these countries seek to have greater control over their transactions and reduce the risk of US economic policies.
In some ways, this is about building an economic “Plan B”. If BRICS countries can trade directly with each other and settle payments in their own currencies, they will reduce their dependence on the dollar and build a more self-reliant financial ecosystem.
Politically, this sends a clear message. By developing BRICS Pay, these countries are collectively declaring that they do not want their economic stability to depend on the policies of another country. So they are moving towards a more multipolar financial world that is not too US-centric and provides alternative avenues for trade and commerce. This is a move for flexibility, sovereignty, and reducing the political leverage that one country can exert over others.
With that in mind, let’s take a look at the features of BRICS Pay and how it will make that vision a reality.
Key Features of BRICS Pay
BRICS Pay aims to create a unified digital payments platform that can operate across multiple countries in the bloc. This will allow users to make payments directly in local currencies, minimizing the need for currency conversions and providing a seamless cross-border payment experience.
BRICS Pay uses digital wallet technology, QR code-based payments, and interoperability frameworks that allow users to link directly to their local banks.
While the specifics of the underlying infrastructure are still evolving, it is expected that the platform will use secure transaction protocols and apply elements of blockchain or digital ledger technology to ensure transparency and reduce cross-border transaction costs.
There are a number of predictions about Ripple’s use of XRP. Factors such as regulatory clarity, strong security measures, and technological readiness will play a key role in determining whether XRP can gain widespread adoption in the financial systems of BRICS countries.
Here are the key features of BRICS Pay:
Digital Wallet Access: Users can access BRICS Pay through a digital wallet that can be linked to a domestic bank account, making it easy to manage finances.
Payment Methods: The wallet supports QR code payments and other digital methods, simplifying international transactions and providing the same convenience as traditional digital payment platforms.
Transactions in Local Currencies: BRICS Pay supports direct transactions in member countries’ currencies, eliminating dependence on the US dollar and minimizing risks associated with exchange rates.
Economic Strengthening: By encouraging the use of local currencies, BRICS Pay aims to strengthen local economies and increase monetary independence.
Cost and efficiency benefits: The system is designed to enable direct currency swaps within BRICS economies, which could reduce transaction fees and processing times compared to traditional banking systems.
Potential benefits of BRICS Pay
The platform allows BRICS countries to operate more independently from Western-dominated financial systems, mitigate the impact of economic sanctions, and foster stronger economic ties within the bloc.
It encourages the use of local currencies for international transactions, supporting BRICS members’ efforts to strengthen their currencies and diversify away from dependence on the US dollar. BRICS Pay could enhance trade between member countries by simplifying the payment process, making cross-border trade easier and more attractive.
By 2023, digital payment volumes in the BRICS economies had reached a significant level of around $3.25 trillion. This figure represents a significant growth in digital transactions between these countries, with an annual growth rate of 26.1%. Forecasts suggest that this market could expand to around $39.3 trillion by 2032, with China expected to contribute nearly half of the total spending.
This rapid growth demonstrates the scale of digital transformation in the BRICS countries, laying a solid foundation for the adoption of systems such as BRICS Pay to support seamless transactions within the bloc.
Challenges to be addressed for a successful BRICS Pay implementation
The BRICS Pay initiative faces challenges related to differences in financial systems, national interests, and currency volatility, but its success could pave the way for similar systems and create a multipolar financial world.
Each BRICS country has its own financial system and regulatory standards, which could complicate the seamless integration that BRICS Pay requires.
That said, most countries in the bloc have been experimenting with central bank digital currencies (CBDCs) in recent years, so interoperability and standardization challenges are expected and sought to be addressed by regulators.
Differences in national interests and regional tensions could also affect cooperation and the smooth implementation of BRICS Pay. Political and macroeconomic tensions are certainly a factor. However, India and China have made progress on the border issue thanks to ongoing dialogue in the BRICS context.
BRICS currencies can be quite volatile, posing risks in transactions without a stable mechanism like the US dollar.
The success of BRICS Pay could encourage countries outside the bloc to adopt or integrate similar systems, paving the way for a multipolar financial world. As digital currencies and blockchain technology develop, BRICS Pay could integrate these innovations to further enhance its functionality and global reach.
