As the global financial market undergoes transformation, the superiority of the Western-controlled payment systems is no longer indisputable.

The global payments ecosystem has been dominated by the Western financial systems, which can be described as the SWIFT (Society for Worldwide Interbank Financial Telecommunication) network. There are several concerns about SWIFT: the transactional costs, the time it takes to process payments and its geopolitical entanglement, which often exposes transactions to be subject to the external political influences. A number of Global South states, which have come to notice these risks and inequities in the global architecture of payments, has led to a call for the creation of an alternative payment system that is low-cost and protected from international political pressure.

The need for Brics countries to develop their own currency and payment messaging systems is becoming more urgent as they decide to cut their dependence on the US dollar and the SWIFT system. The expulsion of Russian banks from SWIFT as a result of that country’s invasion of Ukraine was a motivation for Russia and China to come up with the System for Transmitting Financial Messages (SPFS) and Cross-Border Interbank Payments System (CIPS) to facilitate cross-border transactions. The SPFS has seen rapid growth, attracting participation from 159  non-Brics member financial institutions across 20 countries.”.

Russia, the leader of discussions about integration with other Brics members, is now striving to develop a system of messaging across the bloc that will rival the SWIFT system. Russia will hold the Brics Summit in Kazan in October and some of the items on the agenda include the development of interbank cooperation, providing assistance to the transformation of the international payment system, and increasing the use of local currencies of Brics states during trade.

The financial scene in Africa is on the point of change. For a very long time, the continent has been struggling with a poor financial infrastructure, high transaction costs and restricted access to global markets. The emergence of alternative payment systems stands a chance to address these problems. It is based on an initiative of the African Export-Import Bank (Afreximbank) and the African Union. The establishment of the Pan-African Payment Settlement System (PAPSS) aims to facilitate intra-African trade by providing a mechanism for cross-border payments in local currencies. This reduces the reliance on the external currency such as the dollars or euro and also cuts transaction costs, which in turn can lead to more economic integration between continents.

The PAPSS held the first consultative forum in Cape Town in May. The forum, which was geared towards the chief executives of African banks, brought together the managing directors of commercial banks in Africa. It thus created a venue for the participants to discuss the successes and weaknesses of the PAPSS and establish the best way for it to provide seamless and speedy cross-border payments.

Through the diminishing use of the financial networks controlled by the West, the member states of Brics and Africa can strengthen their financial independence. Furthermore, this movement could lead to an expansion of the economic ties in the Brics bloc and between Brics and the African nations. Increased financial cooperation could provide the foundation for the growth of trade, investment and economic integration, and therefore could give a voice to these regions on the global platform. The extensive spread of these systems will demonstrate a change of geoeconomic context, with areas aiming for financial independence and resilience.

This shift might mark the rise of a highly multi-polar financial environment, which would lead to the removal of the financial domination of any one system and establishment of a fair global economic standard.

Asanda Koyo is a research assistant at the Institute for Global Dialogue associated with UNISA and a Master of Commerce in Applied Development Economics candidate at the University of the Witwatersrand. Her views do not necessarily reflect those of the IGD.

The article was first published by Mail & Guardian, 27 June 2024 https://mg.co.za/thought-leader/2024-06-27-alternative-payment-systems-in-africa-and-brics-member-states-can-shift-geoeconomic-dynamics/