CIPS

The Cross-Border Interbank Payment System (CIPS) is a payment infrastructure launched by the People's Bank of China in 2015 to facilitate and streamline cross-border transactions denominated in Chinese yuan (RMB). Unlike the SWIFT network, which primarily acts as a messaging network, CIPS provides both clearing and settlement services, making RMB transactions faster, more cost-effective, and more secure.

CIPS operates as a wholesale payment system, enabling direct onshore settlement of international RMB payments within China’s domestic financial system. Financial institutions can join CIPS as either direct or indirect participants: Direct participants are typically large banks that hold accounts directly with the PBOC and can settle payments for themselves and others, while indirect participants access CIPS services through a corresponding direct participant. As of early 2025, CIPS had 170 direct participants and nearly 1,500 indirect participants, connecting banks in over 119 countries and regions.

The system plays a key role in internationalizing the RMB, supporting cross-border trade and investment, and reducing reliance on the US dollar. It also supports China's Belt and Road Initiative and the development of Shanghai as an international financial center. CIPS processes millions of transactions annually, with trillions of yuan settled through its network.

Key Improvements of CIPS:

Direct Clearing and Settlement:

• CIPS processes and settles RMB transactions onshore in real time or near real time, reducing reliance on intermediary banks and eliminating delays associated with correspondent banking models.
• SWIFT does not provide settlement services; it only transmits payment messages, which then require additional clearing and settlement steps through other systems.

Speed and Efficiency:

• CIPS achieves average settlement times of around 300 milliseconds for direct participants, making transactions much faster than traditional SWIFT-based RMB transfers.
• SWIFT-based transactions can take up to 48 hours when routed through offshore RMB clearing hubs.

Cost Reduction:

• CIPS transaction fees average 0.01%—a fraction of SWIFT’s costs—making RMB trade settlements significantly cheaper, especially for Belt and Road Initiative countries.
• CIPS reduces the need for multiple correspondent banks and associated foreign exchange costs.

Operational Features:

• CIPS operates 24/7, supporting global business needs, and is integrated with advanced features like Delivery Versus Payment (DVP) for securities and Payment Versus Payment (PVP) for forex.
• CIPS also offers ISO 20022 messaging and is piloting integration with the digital yuan (e-CNY), enabling faster and more secure cross-border transfers.
• Promotion of RMB Internationalization:
• By making cross-border RMB payments more efficient and accessible, CIPS supports the broader international use of the Chinese yuan, reducing reliance on the US dollar.