Nexus is a multilateral international initiative to enable instant cross-border retail payments by interlinking domestic Instant Payments Systems (IPS).
- An IPS is an electronic payments system which facilitates inter-bank fund transfer and sends confirmation of payment to the receiver and originator within a minute or less. E.g. Unified Payments Interface (UPI).
About Project Nexus
- Conceptualized by the Innovation Hub of the Bank for International Settlements (BIS).
- BIS was established in 1930 with its head office in Basel, Switzerland and is owned by 63 central banks, including RBI.
- It will connect IPS of four ASEAN countries (Malaysia, Philippines, Singapore, and Thailand) and India and is expected to go live by 2026.
- Nexus is designed to standardize the way domestic IPS connects 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.
- It aims to achieve G20 targets of enabling cheaper, faster, more transparent and accessible cross border payments
Benefits of Project Nexus:
- Simplifies cross-border payments, reducing complexity, cost, and transaction time.
- It offers complementary low-cost and scalable rail for all payment service providers.
- It bridges gaps in interoperability by fostering standardisation and harmonisation across diverse systems.
Challenges associated with Cross-Border Payment Systems:
- Lack of interoperability: This suggests that different payment systems across countries may not be compatible or able to communicate effectively with each other.
- Slow and expensive: Cross-border payments are often slower to process and more costly compared to domestic transactions.
- Requirement of additional steps such as currency conversion: This highlights the complexity added by the need to exchange one currency for another in cross-border transactions.
- Difficult to scale: This indicates that expanding or growing cross-border payment systems to handle increased volume or reach more countries presents significant challenges.
