Currently, most international transactions are conducted via the SWIFT network, which stands for the Society for Worldwide Interbank Financial Telecommunication. This network connects over 11,000 financial institutions globally, and in 2020 alone, it processed approximately 35 million transactions. The average processing time is about two business days, and you can initiate transactions via bank transfer or through credit and debit cards. In regions like the European Union, North America, and other Western-aligned countries, this system works smoothly with little to no problems.
Is This the Case Everywhere?
Have you ever been to China, or Russia after March 2022? If so, you may have noticed that your usual banking and payment methods no longer function smoothly. Traditional cards may be blocked, and in some cases, there might not even be card readers available for use. This means that, in certain parts of the world, the SWIFT system is not as reliable as it is in Western countries.
A Vacation Challenge
Imagine planning a dream vacation with your family or friends to a tropical beach. You come across stunning photos of Ocean Flower Island in Baimajing, Hainan. Excited, you start booking your hotel, only to find very limited and highly expensive options. But then, you switch to a Chinese-based booking platform, and suddenly, dozens of affordable accommodations appear, with prices as low as a tenth of what you originally found. Why the stark difference?
The Rise of Chinese Payment Systems
In recent years, China has developed highly efficient digital payment systems, notably WeChat Pay (by Tencent) and Alipay (by Alibaba Group). These methods have become the standard for domestic transactions in China, especially those using Chinese Yuan. Payment is incredibly simple: scan a QR code, enter the amount, and the transaction is completed in seconds. Compared to SWIFT’s slower, more cumbersome process, these platforms offer unparalleled convenience. As a result, SWIFT is no longer as competitive, at least in China. If you’re traveling or doing business there, adopting these new payment methods could save you time and money.
The International Dimension
Given the limitations of relying solely on SWIFT, why not expand the range of payment options globally, including adopting systems like WeChat Pay and Alipay?
For countries heavily reliant on SWIFT, the risks are clear. A nation can be swiftly crippled by sanctions simply by being removed from the SWIFT system, effectively halting all international economic transactions. Diversifying payment methods can provide a buffer against these risks and ensure smoother financial operations in times of crisis.
Additionally, China’s strict financial controls make it challenging for anyone within the country to conduct transactions in foreign currencies via SWIFT. This creates difficulties for Chinese tourists abroad, who may struggle to make payments. By accepting WeChat Pay or Alipay as a merchant outside of China, you can tap into a broader customer base and make it easier for Chinese tourists to spend money. For your own business dealings with China, adopting these platforms could simplify future transactions. Even start-ups and incubators could benefit by gaining access to more diverse funding sources, especially from international investors.
