China has gone furthest. In 2015 it launched cips, an interbank messaging system to ease international payments in yuan. It uses the same language as swift, allowing it to talk to other countries’ payment systems. For now just 950 institutions use it—less than 10% of swift’s membership. But “what matters is it’s there,” says Eswar Prasad of Cornell University.
The real revolution is happening in low-value transfers. Like swift, the network of American card schemes is tricky to displace. Member banks and merchants trust each other because they adhere to tested rules. They also like the convenience of the schemes’ settlement platforms, which compute “net” positions between all banks that they square up at the end of the day. So rival schemes struggle to make a dent. In 2014, fearing sanctions could block it from using American schemes, Russia created its own, which now accounts for 17% of domestic cards. But its 70m tally is dwarfed by Visa and Mastercard’s 5bn. Size is not a problem for UnionPay, China’s own club. Just 130m of its 7.6bn cards were issued outside the mainland, however, where it is mostly used by Chinese tourists.
A mightier threat comes from a state-led revamp of domestic payment systems. Eager to reassert control over key infrastructure, some 70 countries have rebuilt their local plumbing to enable near-instant bank transfers at the tap of a screen. Europe is the most advanced, having fused local networks into a bloc of 35 countries and more than 500m people. South-East Asia is also trying to stitch its systems together. On March 5th India and Singapore connected theirs for the first time.
Last year Chinese customers paid $49trn in purchases via mobile, 35 times the total in 2013 https://t.co/RGtbz28DiP
— The Economist (@TheEconomist) May 7, 2020