context: Beijing is prioritising the technological overhaul of financial infrastructure to safeguard economic sovereignty and reduce reliance on Western-dominated banking systems. In a global environment where financial systems are increasingly used as tools of geopolitical leverage, the PRC views the integration of blockchain, AI and Central Bank digital currencies as essential for creating a resilient, 'multi-polar' payment landscape. By cutting the cost barriers of traditional correspondent banking, Beijing aims to secure the movement of capital for both its industrial clusters and retail trade to insulate its cross-border financial activity from external shocks and institutional exclusion.
Zhou Liping 周莉萍 University of Chinese Academy of Social Sciences researcher shares insights on tech in cross-border payments
- technological evolution is the primary driver of cross-border payment diversification and the reshaping of financial infrastructures
- innovation addresses the inherent flaws of the 1970s-era correspondent banking model such as high costs, low efficiency, and opaque processes
- the current global market is dominated by 'four models and double-layer infrastructure'
- correspondent banking, proprietary closed-loops, regional integration and P2P (peer-to-peer) systems
- SWIFT handles information flows, while central bank and dedicated institutions handle capital flows
- retail payments, which were previously a high-cost burden, are being targeted for radical efficiency gains
- the ‘cost high-ground’ in retail vs wholesale payments
- wholesale payments such as inter-bank and large corporate payments account for a majority of total volume but enjoy low costs, while retail payments like C2C (consumer-to-consumer) and small-scale B2B (business-to-business) face high costs
- C2C transactions are identified as the most expensive, creating a significant strategic market opening for new technologies
- wholesale payments such as inter-bank and large corporate payments account for a majority of total volume but enjoy low costs, while retail payments like C2C (consumer-to-consumer) and small-scale B2B (business-to-business) face high costs
- the dual role of blockchain and AI in financial restructuring
- DLT (Distributed Ledger Technology) provides 24/7 automated verification, eliminating bank-hour constraints and enabling real-time settlement while enhancing regulatory traceability
- large language models and generative AI are now being deployed to automate document auditing, interactive anti-fraud measures and global liquidity management
- these technologies are forcing a revolution in traditional systems
- e.g. the SWIFT Global Payment Innovation system now enables nearly 100 percent of payments to be completed within 24 hours using blockchain
- proprietary closed loops and regional interconnectivity are emerging
- international card organisations like Visa and digital wallets like PayPal dominate the retail closed-loop model by using internal infrastructure to bypass clearing and settlement hurdles
- the drawback of the closed-loop model is that the institutions themselves bear the risks of foreign exchange transactions
- there is also a global ‘regulatory gap’, which is also the main direction for future improvement
- regional infrastructure projects, such as the Pan-African Payment and Settlement System, use APIs (Application Programming Interfaces) to achieve seamless ‘machine-to-machine’ data exchange and system interoperability
- international card organisations like Visa and digital wallets like PayPal dominate the retail closed-loop model by using internal infrastructure to bypass clearing and settlement hurdles
- CBDCs (Central Bank Digital Currencies) as the ‘final breakthrough’
- CBDC projects (e.g., the Jasper-Ubin or mBridge models) demonstrate that domestic blockchain-based systems can interconnect directly without third-party intermediaries
- this model allows cross-border retail payment efficiency to eventually match wholesale payments
- CBDC projects (e.g., the Jasper-Ubin or mBridge models) demonstrate that domestic blockchain-based systems can interconnect directly without third-party intermediaries
- the PRC must continue to use technology to promote the cross-border payment market
- while legacy models may be disrupted, traditional institutions will not disappear but will instead adopt new roles within a more diverse, tech-driven payment ecosystem
- tech innovation alone cannot solve the 'trust issues' between sovereign nations; it requires a matched evolution in institutional frameworks and bilateral trust-building