POWER Framework: BRICS Alternate payment systems

The POWER Framework offers a broader version of BRICS Alternative Payment Systems. Read here to learn about its need for Financial Sovereignty of the Global South.

Ahead of the 18th BRICS Summit in New Delhi under India’s chairmanship, BRICS Finance Ministers and central bank representatives met in Jaipur to discuss financial cooperation, local-currency settlements, and alternative cross-border payment mechanisms.

The discussion reflects a broader transformation in the international financial system. Emerging economies increasingly seek payment infrastructure that is faster, cheaper, resilient to geopolitical disruptions and less dependent on a limited set of currencies and financial intermediaries.

However, for India, the objective should not simply be de-dollarisation. It should be strategic autonomy through neutral, interoperable and secure payment infrastructure, while retaining compatibility with the existing global financial architecture.

What is the BRICS POWER Framework?

The proposed POWER framework provides a broader vision for BRICS cooperation.

Element	Core idea
P – Principle	UN Charter, sovereign equality, non-interference and peaceful settlement of disputes
O – Openness	Open world economy, WTO-centred multilateral trade and resistance to protectionism
W – Win-Win	SDGs, macroeconomic coordination, food and energy security and development cooperation
E – Engine	Leverage BRICS’ demographic, economic, digital and technological scale
R – Responsibility	BRICS as a stabilising force supporting multipolarity and global cooperation

The framework therefore attempts to position BRICS not merely as an economic grouping but as a potential platform for Global South cooperation.

Why is BRICS Exploring Alternative Cross-Border Payments?

1. High Cost of Correspondent Banking

• Cross-border transactions between developing economies frequently pass through intermediary banks in major financial centres.
• This can result in multiple intermediaries, higher fees, longer settlement times, and greater transaction risk.
• The burden is particularly significant for MSMEs, exporters, migrant workers and tourists.

2. Dependence on the US Dollar

Countries without direct currency-conversion arrangements may have to route transactions through the dollar.

This can increase:

• Foreign-exchange costs
• Exposure to exchange-rate volatility
• Dependence on US monetary conditions

Local-currency settlement can potentially reduce these costs.

3. Dependence on Conventional Financial Infrastructure

• The dominance of established international financial messaging and correspondent-banking networks creates vulnerabilities during geopolitical crises.
• The exclusion of Russian banks from SWIFT following the Russia-Ukraine conflict demonstrated how financial infrastructure can become an instrument of geopolitical pressure.
• For BRICS members, this has strengthened the argument for financial resilience and diversification.

What Alternatives are Being Considered?

1. Local-Currency Settlement

• BRICS countries can settle bilateral trade directly in their national currencies.
• This can reduce dependence on intermediary currencies and lower foreign-exchange costs.
• However, it requires mechanisms to address currency convertibility, liquidity and exchange-rate risks.

2. Central Bank Digital Currencies

• Wholesale CBDCs can potentially facilitate faster cross-border settlement.
• A major advantage is Payment-versus-Payment (PvP) settlement, where two currencies are exchanged simultaneously.
• This reduces the possibility that one party delivers its currency without receiving the counter-currency.

3. UPI-Linked Payment Systems

India’s UPI demonstrates how interoperable instant-payment systems can facilitate rapid, low-cost transactions.

Linking domestic fast-payment systems could particularly benefit:

• Remittances
• Tourism
• Small-value trade
• Retail payments

Rather than creating an entirely new global system, BRICS could build interoperable networks connecting existing domestic systems.

4. Project Nexus

• A multilateral payment architecture such as Project Nexus offers an alternative to creating numerous bilateral connections.
• This can reduce the complexity of establishing separate bilateral payment linkages.

5. BRICS Clear

• The proposed BRICS Clear concept seeks greater autonomy in clearing and settlement.
• It could potentially reduce dependence on established financial infrastructure and strengthen resilience against financial disruptions.
• However, its viability would depend on governance, credibility, liquidity, regulatory compatibility and international acceptance.

Potential Benefits for the Global South

• Lower transaction costs: Reducing intermediaries and currency conversions can make international transactions cheaper.
• Faster settlements: Digital payment infrastructure can reduce settlement times compared with conventional multi-stage processes.
• Financial inclusion: Low-cost digital payments can particularly benefit MSMEs, migrant workers and smaller exporters.
• Greater monetary autonomy: Local-currency settlements can reduce excessive dependence on a dominant reserve currency.
• Greater resilience: Alternative channels can provide redundancy during financial disruptions.
• Support for South-South trade: A robust payment ecosystem could facilitate growing trade among emerging economies.

Major Challenges

1. Geopolitical Divergence

BRICS members do not have a unified vision.

For instance:

• Russia strongly advocates de-dollarisation.
• China seeks greater internationalisation of the renminbi.
• India prioritises strategic autonomy, payment efficiency and interoperability.

Thus, BRICS is not a homogeneous economic bloc.

2. Risk of Yuan Dominance

• Replacing dollar dependence with excessive dependence on another dominant currency would not constitute genuine strategic autonomy.
• If alternative infrastructure becomes overwhelmingly dependent on the Chinese renminbi, the architecture could merely replace one form of concentration with another.
• For India, de-dollarisation should not become de-diversification.

3. Regulatory Fragmentation

BRICS economies have different:

• Capital controls
• Data-localisation requirements
• AML/CFT regulations
• Foreign-exchange regimes
• Consumer-protection standards
• Cybersecurity frameworks

Harmonising these systems is a major challenge.

4. Cybersecurity Risks

• A common digital payment architecture would become critical financial infrastructure.
• A cyberattack could potentially produce payment disruption, liquidity stress, currency volatility, and financial instability
• Therefore, cybersecurity and operational resilience must be built into the architecture from the beginning.

5. Scalability

• Bilateral payment linkages are relatively manageable.
• A multilateral interoperability layer is therefore essential for scalability.

6. Sanctions and Secondary-Sanctions Risks

• Financial institutions participating in an alternative system may face regulatory or geopolitical pressure if transactions involve heavily sanctioned jurisdictions.
• Therefore, BRICS must carefully balance financial autonomy with access to the wider international financial system.

India’s Strategic Approach

• India should avoid framing the issue as a simplistic “BRICS vs Dollar” contest.
• Instead, India should pursue strategic autonomy, interoperability, and technological neutrality
• This means building alternative channels without unnecessarily fragmenting the global financial system.

India’s Broader Strategic Opportunity

• Alternative payment infrastructure can complement India’s broader economic and technological objectives.
• It can support digital public infrastructure, cross-border payments, internationalisation of Indian fintech, rupee ecosystem, greater Global South integration.
• India’s experience with UPI and digital public infrastructure allows it to shape the architecture rather than merely participate in it.

Critical Assessment

Objective	Opportunity	Risk
De-dollarisation	Greater monetary autonomy	Geopolitical retaliation
Local-currency trade	Lower FX costs	Currency volatility
CBDC settlement	Faster PvP settlement	Cybersecurity
BRICS Clear	Financial resilience	Sanctions/fragmentation
UPI linkage	Low-cost instant payments	Regulatory incompatibility
Yuan use	Greater liquidity	Chinese financial dominance
Parallel system	Strategic autonomy	Global financial bifurcation

Way Forward

1. Adopt an Interoperability-First Architecture

• Instead of creating an entirely parallel financial system, BRICS should connect existing domestic systems.
• UPI, Other instant-payment systems, CBDCs, Common interoperability standards

2. Begin with Pilot Corridors

A gradual, opt-in approach should initially focus on:

• Bilateral trade
• Tourism
• Remittances
• MSME transactions

Successful corridors can subsequently be expanded.

3. Strengthen India’s CBDC Ecosystem

• India should continue developing both retail and wholesale e-rupee capabilities, particularly for cross-border settlement experiments.

4. Harmonise Regulatory Standards

BRICS should develop common protocols covering:

• AML/CFT
• KYC
• Data protection
• Cybersecurity
• Consumer protection
• Settlement finality

This should remain compatible with FATF standards and other international norms.

5. Ensure Currency Diversification

• A BRICS payment ecosystem should not become dependent on any single currency.
• A better approach would be a multi-currency settlement architecture supported by transparent conversion and liquidity mechanisms.

6. Maintain Compatibility with Existing Systems

New systems should remain interoperable with:

• Existing international messaging systems
• IMF frameworks
• BIS standards
• Established correspondent banking where appropriate

This would prevent the emergence of two fragmented and incompatible global financial systems.

Conclusion

BRICS’ exploration of alternative cross-border payments reflects a legitimate desire among emerging economies for lower transaction costs, greater financial resilience and greater autonomy in the international financial system.

However, the objective should not be to replace one financial dependence with another or to create competing and fragmented financial blocs.

For India, the most pragmatic approach is to promote a neutral, multi-currency, interoperable and secure payment architecture, beginning with targeted pilots and expanding gradually.

Ultimately, the success of BRICS financial cooperation will depend not on whether it can “replace the dollar”, but on whether it can give the Global South more choices without sacrificing stability, interoperability and trust.

Strategic autonomy in the digital age means having alternatives, not abandoning interdependence.