One of the big financial news items this past week was the announcement that Cambodia had applied for membership in the Cross-Border Interbank Payment System (CIPS). China’s payment system was developed for several reasons but acceptance should increase the trade and investment between China and Cambodia – so what are the main benefits?
What is CIPS?
The payments system was established in 2015 to help facilitate the movement of funds (but does not move funds itself) and to clear and settle onshore and offshore transactions; “It allows global banks to clear cross-border yuan transactions directly onshore, instead of through clearing banks in offshore yuan hub,” reported Reuters.
Cross-Border Interbank Payment System moves funds by using SWIFT-enabled messaging (Society for Worldwide Interbank Financial Telecommunication), and CIPS is also backed by the People’s Bank of China (PBOC).
CIPS adopted the ISO 2022 international payments messaging standard which helped facilitate the wider use of cross-border connectivity of CIPS, which is increasing RMB transaction volumes and accelerating the evolution of the RMB into a major global currency, said one report.
CIPS Membership Benefits
The main benefits are the standardisation of interbank communications, to allow for better efficiency and cheaper transactions. The more countries use CIPS, would also benefit China’s digital currency, the e-CNY.
CIPS Cambodia Benefits
It was not confirmed when and if Cambodia would successfully join the CIPS.