China Takes On Swift With New Cross-Border Payment System

China is reportedly preparing the commercial launch of a digital currency-focused cross-border payment program.

The new platform, dubbed “mBridge,” is being backed by the central banks of China, Hong Kong, Saudi Arabia, Thailand and the United Arab Emirates, the Financial Times (FT) reported Saturday (June 13), citing sources familiar with the matter.

While it’s not clear when the system will launch, the sources said preparations were in their advanced stages, and that fees for using the service would be half those of standard international payment systems.

mBridge is expected to appeal to smaller businesses that find payment systems like Swift too costly and difficult to use, the sources added.

FT noted that this is playing out at a time when other regional payment systems are enjoying new momentum, with the likes of the European Central Bank’s SEPA and Ant Group’s cross-border QR code network targeting quicker and cheaper transactions, especially for smaller, real-time payments by tourists.

“There is an alternative financial systems arms race going on quietly in the background,” said Tom Keatinge , the founding director of the Centre for Finance and Security at U.K.-based RUSI , citing the White House’s embrace of stablecoins .

He added China wants to use systems like mBridge to give its ECNY digital currency a larger role in the world of global finance.

“You could say it’s a digital currency belt and road, and so it’s no surprise that the Chinese would be continuing to press ahead with that,” Keatinge said of mBridge.

The “global payments landscape,” which was once dominated by Swift, is splitting into a “system of competing networks, with mBridge set to be one of them,” Gene Ma , head of China research at the Institute of International Finance , told FT.

In other cross-border payments news, recent PYMNTS Intelligence and Mastercard research shows that more than half of American small and medium-sized businesses (SMBs) purchased goods and inputs from overseas suppliers. Among companies generating between $1 million and $10 million in yearly revenue, global sourcing came to 73%.

However, the operating model of SMBs has evolved faster than the infrastructure supporting payments, said Mike Kresse , executive vice president, commercial and new payment flows, North America at Mastercard.

“What we need to see is that cross-border payments become just as easy as ‘me sending you money’ in a peer-to-peer payment or just as easy as a checkout experience in a normal consumer transaction,” he said. “We need to see that same level of seamlessness brought to bear with really a focus on keeping it simple and removing the mystery around cross-border money movement.”