The BRICS countries are creating a single payment system, BRICS Pay, as part of the drive to establish a common system for retail payments and transactions between the member countries. In the near future, these countries plan to introduce a special cloud platform, which will connect their national payment systems. An online wallet will be developed with access to these payment systems, as well as a mobile application similar to Apple Pay, which can be installed on smartphones for purchases in any of the five BRICS countries, regardless of which currency the payment and the money in the account of the buyer are denominated in.
Thus, Brazil, Russia, India, China and South Africa will be able to use their own national currencies as a direct basis of exchange for external payments. This is being heralded as a serious step on the path to de-dollarization.
Innovative systems like Apple Pay and Samsung Pay are already popular in China and India, and have recently appeared in Russia, where on 4 March 2019, the Mir Pay payment service was established for Mir cards users; it is now available on Android-based smartphones.
The BRICS Pay contactless payment system will not duplicate the national payment systems; it will simply serve as a service for linking the credit or debit cards of the citizens of the five BRICS countries to online wallets, which will offer them the ability to pay using a smartphone.
At the same time, BRICS Pay will increase the popularity of national payment systems, which are gradually replacing Visa and MasterCard. This process is especially noticeable in Southeast Asia, where the Chinese system UnionPay is the leader; in 2015 it surpassed Visa in terms of total operations. UnionPay has already issued over 6 billion national cards.
The scale of China’s economy and the sheer size of its domestic market, number of people and the development of outbound tourism have all contributed to the growing popularity of UnionPay. Now, China’s Huawei telecommunications corporation, together with the UnionPay payment service, is launching its own system in Russia: Huawei Pay. Russia will become the second country after China where Huawei Pay will function.
The national payment systems of the other BRICS nations are smaller in scale than China’s, but have demonstrated promising dynamics. India’s RuPay payment system has already issued 500 million national cards, Brazil’s ELO has issued 120 million cards, and Russia’s Mir system has issued about 50 million cards.
The Russian media have cited the country’s Federal Antimonopoly Service as saying that in 2018, the Mir national card system took approximately 5.5 percent of the market for payment systems away from Visa, as well as 6 percent of MasterCard’s market share. The usage of Visa cards by Russian citizens in non-cash payments decreased from 45% of the total market to 39.5%, and MasterCard’s market share dropped from 42% to 36%. Now Mir cards account for 24.5% of the volume of non-cash payments; the volume of transactions conducted using the Mir national cards during 2018 amounted to 2.7 trillion rubles.
Why is it important for the BRICS countries to move towards payment system integration? Currently, external settlements using UnionPay non-cash transactions, ruble-yuan for example, require a conversion into US dollars, which necessitates the use of US banks. This process creates additional operational risks, stemming from the threat of sanctions. Similarly, UnionPay payments involving euro cards pass through European banks. US protectionism and Trump’s trade wars are compelling the regional powers to forge financial and economic ties with their neighbours and partners outside the “dollar zone”.
In order for settlements in national currencies to bypass the dollar, the People’s Bank of China has to open lines for currency swaps to partner banks to support the exchange trade in yuan in regional currency markets. Similar lines should be opened by the central banks of Brazil, Russia, India and South Africa. In this case, a settlement mechanism based on a basket of currencies of the BRICS countries and a separate financial infrastructure will appear. This, in turn, will support the diversification of the global financial system and currency multi-polarity. BRICS Pay, as a contactless transfer system, will give the citizens of the BRICS countries a convenient means of conducting transactions.
The Chinese Belt and Road megaproject and Russian integration initiatives within the EAEU can serve as a step towards creating a “larger space economy”, where the rules will be determined by the leading powers of the region, and investment resources will be concentrated in their respective national currencies.
In addition, the BRICS Pay contactless payment system utilises the latest FinTech: technology and innovations which make it possible to successfully compete with traditional banks in the financial services market.
It is in the interest of the BRICS countries to develop FinTech standards and technology for secure data transfers from smartphones to terminal readers.
At one time, the control of advanced technology by the United States and the West, and the ability of their corporations to broaden the use of their established standards in the financial sector to reach international markets led to the division of the world into a financially privileged technological metropolis and a periphery. This led to the erosion of political sovereignty and reinforced the inferior economic status of the developing world.
Therefore, any steps the BRICS countries take to create and maintain their own technology and infrastructure are economically viable and will help ensure the independence of the respective countries’ policies and economies.