Key Takeaways
- Project Nexus aims to enable instant cross-border payments by connecting several domestic instant payment systems (IPS) worldwide.
- Even with just the first wave of connected countries, Nexus has the potential to connect a market of 1.7 billion people globally.
- The Reserve Bank of India will join the fourth phase of Project Nexus alongside Bank Negara Malaysia, Bangko Sentral ng Pilipinas, the Monetary Authority of Singapore, and the Bank of Thailand, expanding the project to include India’s Unified Payments Interface (UPI).
India’s Unified Payments Interface (UPI), the world’s largest instant payment system, is set to join the fourth phase of the Bank for International Settlements (BIS) Project Nexus.
What is BIS Project Nexus?
Project Nexus, an initiative spearheaded by the Bank for International Settlements (BIS), aims to enable instant cross-border payments by connecting several domestic instant payment systems (IPS) worldwide.
Rather than requiring IPS operators to establish multiple custom connections for each country, Nexus provides a standardized, single-connection solution that enables seamless transactions across borders. By simplifying and unifying the payment infrastructure, Project Nexus seeks to enhance efficiency, reduce costs, and improve the accessibility of international payments, ultimately benefiting millions of users globally.
BIS and Global Partners Advance to Phase Four of Project Nexus
The Bank for International Settlements (BIS) and its partners have today unveiled the comprehensive blueprint for phase three of Project Nexus.
The forthcoming phase four will witness the participation of key financial institutions, including Bank Negara Malaysia, Bangko Sentral ng Pilipinas, the Monetary Authority of Singapore, and the Bank of Thailand. These entities, which collaborated in phase three, will now be joined by the Reserve Bank of India, thereby integrating India’s Unified Payments Interface (UPI), the largest IPS globally. In 2023, the total number of UPI transactions crossed 100 billion.
Today, UPI has a presence in France, Sri Lanka, Singapore, the UAE, Bhutan, Nepal, and Mauritius, among others. RBI has planned to expand UPI’s reach to over 20 countries in the next 4 years. The inclusion of UPI in Project Nexus’s fourth phase further accelerates this vision, enhancing UPI’s global footprint and integrating it with other major instant payment systems.
Bank Indonesia will continue its association as a special observer, having been actively involved in the third phase.
Standardizing Cross-Border Payments
Project Nexus aims to standardize the connection process for domestic IPS, eliminating the need for multiple custom connections. With Nexus, an IPS operator can connect to a single network, enabling instant access to other countries within the network. This streamlined approach promises to simplify and accelerate the process of cross-border transactions.
Agustín Carstens, General Manager of the BIS, emphasized the transformative potential of Nexus: “I wish our partners in Nexus every success as they advance the project from concept to reality. This is the first BIS Innovation Hub project that central banks are moving towards a live phase together with instant payment providers. When implemented, it will greatly enhance cross-border payments in line with both the G20 cross-border payments programme and our mission to develop public goods in the technology space to support central banks and improve the functioning of the financial system.”
Carstens further highlighted the expansive reach of Nexus, stating, “Even with just the first wave of connected countries, Nexus has the potential to connect a market of 1.7 billion people globally, allowing them to make instant payments to each other easily and cheaply.”
Blueprint for the Future
The phase three blueprint, resulting from a year-long collaboration, outlines the governance, scheme, and oversight arrangements tailored to accommodate regulatory differences among participating countries. It ensures robust risk management, safety, efficiency, and resilience for all Nexus payments. Additionally, the blueprint details the business and revenue model for Nexus, aiming for financial self-sufficiency and incentivizing key industry participants to join.
The technical architecture and operational model of Nexus, informed by the 2022 proof of concept, are also detailed in the report. Complementary resources, including a scheme rulebook, technical implementation guides, and ISO 20022 message specifications, are available to central banks upon request.
Towards Live Implementation
To bring Nexus to life, partner central banks and IPS operators have agreed to establish the Nexus Scheme Organisation (NSO). This new entity will be responsible for managing the Nexus scheme and achieving instant cross-border payments at scale. The NSO will be wholly owned by the central banks and/or IPS in participating countries, depending on their domestic structures.
While the BIS will not own or operate the NSO, it will continue to play a pivotal technical advisory role. The BIS will also facilitate cooperation among members and assist in the entry of new participants, ensuring Nexus’s global ambitions are realized.
BIS Develops Project Nexus to Compete with Rising Crypto Payments?
This initiative can indeed be seen as a response to the growing popularity of cryptocurrency payments, which offer instant international transactions without the traditional barriers. Cryptocurrencies have highlighted the demand for faster and more efficient global payment solutions, pushing traditional financial institutions to innovate.
By developing Project Nexus, the BIS seeks to leverage the strengths of established financial systems while addressing their shortcomings, providing a secure, regulated, and efficient alternative to crypto payments. This move is part of a broader effort to maintain the relevance and competitiveness of traditional financial institutions in an increasingly digital world.
Global Impact
As the world becomes increasingly interconnected, the ability to make instant, cost-effective cross-border payments is more critical than ever. Project Nexus, with its innovative approach and expanding network of participating countries, stands at the forefront of this transformation. By simplifying and standardizing the connection process for domestic IPS, Nexus aims to significantly enhance the efficiency and accessibility of cross-border payments, benefiting millions of individuals and businesses worldwide.
The successful implementation of Nexus could set a new standard for global financial systems, driving economic growth and fostering greater financial inclusion.
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