Home Payments Project to connect domestic instant payment systems globally steps up a gear

Project to connect domestic instant payment systems globally steps up a gear

Project Nexus progress: (from L-R) Sethaput Suthiwartnarueput (Bank of Thailand), Eli Remolona (Bangko Sentral ng Pilipinas), Shri Shaktikanta Das (Reserve Bank of India), Agustín Carstens (BIS), Datuk Shaik Abdul Rasheed Ghaffour (Bank Negara Malaysia), Chia Der Jiun (Monetary Authority of Singapore) and Dicky Kartikoyono (Bank Indonesia) | Credit: BIS

A central bank-led initiative aiming to super-charge the speed of cross-border payments across the globe is stepping up a gear three years after its conception.

The Bank for International Settlements (BIS) and partner central banks announced on 1 July that they have completed phase three of ‘Project Nexus’ and developed a ‘comprehensive blueprint’ that will allow ready participants to progress towards the ‘seamless’ connection of their domestic instant payment systems (IPS).

Nexus is designed to standardise the way domestic IPS connect to one another. Rather than an IPS operator building custom connections for every new country to which it connects, the operator only needs to make one connection to Nexus. This single connection would allow the IPS to reach all other countries in the network.

Phase four will see the Bank Negara Malaysia, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore (MAS), Bank of Thailand and domestic IPS operators – which all worked in partnership during phase three – joined by the Reserve Bank of India. This would expand the potential user-base to include India’s well-known Unified Payments Interface (UPI), the world’s largest IPS. Bank Indonesia (BI) joined the project during phase three but is now a ‘special observer’.

It is the first BIS Innovation Hub project in the payments area to move towards ‘live implementation’, with BIS’s general manager hailing its potential to ‘connect a market of 1.7 billion people globally, allowing them to make instant payments to each other easily and cheaply’.

RELATED ARTICLE BIS-led cross-border instant payments project progresses – a news story (23 March 2023) on Project Nexus moving to its third stage

Three years in the works

At present there are more than 70 instant (or ‘fast’) payment systems globally, which typically allow people to send money to each other within seconds. However they are domestic systems, and international payments remain ‘opaque, slow and expensive’, according to BIS, which stated last year (in an earlier project communication) that ‘trying to connect domestic systems bilaterally with other countries would be expensive and complex, generating an exponential number of links’.

Project Nexus – in the form of an (initial) blueprint (that BIS says has now been ‘superseded’), project weblink and summary materials, including a three-minute explanatory video – was introduced just under three years ago (July 2021). The blueprint included technical standards, operational guidelines and common functionalities for a scalable network that would connect national instant payment systems, enabling cross-border payments that reach their destination ‘within 60 seconds’.

Introducing the initiative at the time, BIS Innovation Hub’s then-head Benoît Cœuré described the project as ‘trying to achieve the equivalent of internet protocols for payments systems’. This would, he explained, involve creating a model through which any country can join by adopting certain technical and governance requirements’. (Cœuré left BIS in 2022 to become president of France’s Autorité de la concurrence: he was succeeded by Cecilia Skingsley).

The explorations have been building on the bilateral linkage of Singapore and Thailand’s national payment networks, respectively PayNow and PromptPay, in April 2021. This allows customers of participating financial institutions to send payments across the border using just the recipient’s phone number. This breakthrough bilateral arrangement was followed in February 2023 by a similar two-way instant payment systems link between Singapore and India. But ‘each new bilateral initiative requires a complex technical integration and multi-party legal negotiation,’ BIS noted last year.

RELATED ARTICLE ‘BIS-Singapore project aims for international payments ‘as quick as a text message’ – our news story (30 July 2021) on the launch of Project Nexus (and original blueprint)

‘Nexus Scheme Organisation’ on way

A 75-page report – titled ‘Project Nexus: Enabling instant cross-border payments’ – has now been published (this week), setting out the conclusions and lessons of phase three. It is complemented by a detailed scheme rulebook and technical implementation guides.

To facilitate live implementation, the central banks and IPS operators are to establish a new entity – the Nexus Scheme Organisation (NSO) – which will be responsible for managing the scheme and ‘continuing the mission to achieve instant cross-border payments at scale’.

The NSO will be wholly owned by the central banks and/or IPS in participating countries, depending on specific domestic structures. 

BIS itself will ‘continue its support by playing a technical advisory role as participating countries work towards taking Nexus live’. The Switzerland-headquartered institution will also seek to ‘facilitate co-operation among members and the entry of new participants, helping to realise Nexus’s global ambition’.

BIS general manager Agustín Carstens described the project in this week’s announcement as moving “from concept to reality”, saying that the Nexus approach has the potential to connect 1.7 billion people globally – “even with just the first wave of connected countries”. The platform is expected to go live by 2026 according to a short RBI announcement that it has joined the project.

RELATED ARTICLE Singapore and Malaysia launch QR code payment linkage – a news story (10 April 2023) on a QR code payment linkage between the neighbouring nations

Nexus’s expected benefits

An agreement to take forward the Nexus project was signed by the BIS and the central banks of the founding countries on 30 June in Basel, Switzerland.

“Nexus can reshape cross-border payments,” said MAS managing director Chia Der Jiun in a press release issued by his own authority, describing the Nexus as a “global public good”.

In the same press release, RBI governor Shaktikanta Das said his authority was “happy to share its knowledge, experience and technical know-how with this initiative”, saying that UPI had “made phenomenal progress in recent years and become an international trend-setter with more than 400 million transactions per day”.

“In my view, the greatest advantage of Project Nexus will be to make cross-border payments much faster and less costly,” Das continued, going on to refer to World Bank (2023) data that the average cost of remitting $200 across borders is about 6.2 per cent. “Project Nexus will bring down this cost,” he said. “This is a precursor to greater international co-operation among countries to enable faster cross-border remittances at a lower cost.”

“Central banks have always played a role in payments as a public good,” said BSP governor Eli Remolona. “With Nexus, this role will be extended to cross-border payments, maximising the network effects. Thus, the Bangko Sentral ng Pilipinas will continue to work with the Philippine payments industry, BIS and other interested countries towards its live implementation. We look forward to Nexus providing overseas Filipinos with a cheaper and faster means to send money to family back home, and facilitating the globalisation of Filipino small- and medium-scale enterprises.”

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Scalability ‘validated’

The project to date has seen a prototype used to successfully connect replica versions of three established IPS: Malaysia’s Real-time Retail Payments Platform (RPP), Singapore’s Fast and Secure Transfers (FAST) payment system and the Eurosystem’s TARGET Instant Payment Settlement (TIPS). Payments were sent using mobile-phone numbers or recipients’ company registration numbers.

The BIS Innovation Hub’s Singapore centre has also worked with the project’s erstwhile partners over the past year to develop a ‘comprehensive’ scheme and governance framework, commercial model and the new technology blueprint.

Central banks, standard-setting bodies, IPS operators and commercial entities around the world have also been consulted ‘to validate that Nexus is scalable and interoperable beyond the current participants’, BIS states.

BIS described the original (2021) Project Nexus blueprint as a starting point, to be further refined and improved towards a technical proof-of-concept.

Bank Negara Malaysia, Bangko Sentral ng Pilipinas, MAS, Bank of Thailand and Bank Indonesia signed a Memorandum of Understanding (MoU) on ‘Co-operation in Regional Payment Connectivity’ in November 2022. Brunei Darussalam Central Bank, Bank of the Lao People’s Democratic Republic and the State Bank of Vietnam have since joined the initiative.