How Swift makes renminbi payment frictionless

Swift uses their global payments innovation (gpi) to make cross-border payments as smooth as possible, which helps facilitate renminbi internationalization.

Swifts’s gpi enables banks to make cross-border renminbi payments to Chinese companies. By collaborating with China’s Cross-border Interbank Payment System they aim to make renminbi payments as fast as possible, Michael Moon, head of payments markets for Asia-Pacific at Swift, tells The Asset.

“Gpi will provide an expressway or high-speed train service for payments into or out of China. You send payments through Swift’s gpi to all the companies served by the 16 banks in China that have subscribed to the gpi service,” Moon tells The Asset.

A recent Swift report shows that the renminbi only ranked sixth as a share of total global payments by volume. In a bid to further boost renminbi internationalization, Chinese corporates have been proactively undertaking initiatives to push renminbi payments over the past decade.

“What makes companies choose renminbi transactions as opposed to US dollar, is that both businesses have to agree on the business in renminbi,” says Moon. “We have seen evidence in different places where Chinese exporters provide incentives, rebates or discounts if importers can settle in renminbi.”

Apart from Chinese corporates, Chinese financial institutions have also been playing a significant role in renminbi internationalization, via setting up their branches all over the world and across Belt-Road countries. This has built a solid foundation for Chinese and overseas corporates to pay and receive in renminbi.

“Chinese authorities are rapidly onboarding official designated renminbi clearing centres around the world. That provides financial infrastructure in the offshore market to process renminbi,” says Moon. “We see more institutions connecting, more transactions occurring, and more policies favouring renminbi internationalization.”

Malaysia and Germany are the two countries which have had the highest growth in renminbi utilization for the past three years. For the first six months of 2017, Malaysia and Germany have seen a 551% and 436% growth respectively, compared to the same period in 2014.

“1,900 financial institutions made worldwide payments in renminbi in June 2017. And the number is still growing. That is a helpful and leading mechanism to internationalize the currency,” says Moon.

Currently, over 11,000 banks, securities organizations, market infrastructure providers and corporate customers are using services from Swift.

Photo: Swift.com