China’s CIPS will become settlement norm in Mongolia within 2 years, Golomt Bank says

China's cross-border payment system, CIPS, is transforming Mongolia's banking sector, according to Golomt Bank, the country's second-largest lender. Golomt became one of the first Mongolian banks to connect directly to CIPS, China's yuan settlement network established in 2015, with transactions commencing in September 2022. Within six months, 96 percent of Golomt's yuan payments had migrated from the Swift messaging network to CIPS, significantly reducing settlement times and lowering transaction costs for importers and small businesses trading with China.

Golomt's CEO, Amarzaya Odonbaatar, stated that CIPS allows for direct participation in the system, eliminating the need to route through other banks. He noted that the speed of CIPS transactions was the most significant advantage, as it demonstrated to customers the convenience of the system. Odonbaatar expects that within one or two years, almost all major banks in Mongolia will join CIPS, leading to a rapid increase in yuan transactions through the network.

This shift reflects China's growing financial influence over Mongolia, as the country is heavily reliant on China for its commodity exports and consumer goods. However, Hong Kong is also becoming increasingly important for Mongolia as a gateway to international capital. Golomt is exploring a potential London listing, as well as issuing a panda bond in China's domestic market to diversify its funding sources.

Despite challenges such as high foreign exchange hedging costs, Golomt is aggressively pursuing overseas expansion and investing in artificial intelligence, allocating between 60 and 85 percent of its annual capital expenditure to IT and AI.