Detailed explanation of CIPS cross-border settlement system and cross-border e-commerce payment and settlement system

CIPS (Cross-border Interbank Payment System), the RMB cross-border payment system, is a system dedicated to RMB cross-border settlement. It not only covers the operational structure, participating entities and regulatory structure, but also provides a solid foundation for cross-border e-commerce payments.

CIPS Operational Architecture

The operating architecture of CIPS consists of three parts: bank front-end system, in-bank system interface layer and People’s Bank of China CIPS interface layer:

• Bank front-end system: Responsible for actual business operations, including but not limited to changes or additions of participants, transfer inquiries, foreign exchange collection and refund, and other basic businesses.
• In-bank system interface layer: Responsible for communication tasks with the bank’s front-end system.
• People’s Bank of China CIPS interface layer: It focuses on communication with People’s Bank of China CIPS to ensure smooth business processes such as the smooth sending and receiving of messages.

Participant

Learning from the New York Clearing House Interbank Payment System (CHIPS) in the United States, CIPS introduces two roles: direct participants and indirect participants:

• Direct participants can operate directly in the system;
• Indirect participants need to complete business processing through direct participants.

Regulatory Structure

As the main regulator of CIPS, the People’s Bank of China ensures the stable operation of the system from information collection to on-site inspections. In addition, a series of rules and regulations have been formulated to clarify participants’ access standards and requirements for account management and business processing.

Cross-border e-commerce payment and settlement system

The cross-border e-commerce payment and settlement system includes three levels: support layer, core layer and product layer. Among them,

• The support layer involves infrastructure such as operation and maintenance monitoring systems and log analysis systems;
• Core layer covers the core payment module and payment service module;
• The product layer is composed of services provided by the core layer and is directly oriented to users, merchants and operation managers.

Core system and service system

In the specific process of cross-border e-commerce payment and settlement, the user first initiates the payment process, and then the system calls the corresponding payment product to execute the payment based on the selection of the payment tool. In this process, the payment routing will select the optimal payment channel based on a variety of factors, and finally realize the fund transfer through the bank or third-party payment interface.

The service system is further subdivided into basic service system, capital system, risk control and credit system:

• Basic service system includes customer information management, payment channel management, account and accounting system, order system, etc.;
• Funding system involves functions such as accounting, fund management, liquidation and profit sharing;
• Risk control and credit system ensures that all payment behaviors are risk assessed, and based on this, advanced services such as order loans are provided.

To sum up, both CIPS and cross-border e-commerce payment and settlement systems play important roles in their respective fields, jointly promoting the facilitation and development of global trade.