Project Nexus: Building a Global Network for Instant Cross-Border Payments

In an increasingly interconnected world, the demand for efficient, reliable, and affordable cross-border payments has surged. Over 70 countries now have domestic Instant Payment Systems (IPS) that enable transactions to reach recipients within seconds at minimal cost. Despite the success of IPS for domestic transactions, cross-border payments remain plagued by high fees, slow processing times, and opaque systems. Enter Project Nexus by the Bank for International Settlements (BIS), a visionary initiative aiming to standardize the connections between IPS systems across borders.

The Role of Instant Payment Systems in Domestic Transactions

Domestic IPS have become game-changers in how people and businesses handle payments. In countries with IPS, transactions are now clear in seconds, cost little to nothing and operate 24/7. This has been transformative in personal banking, business transactions, and government disbursements, providing a real-time, dependable solution that is always available. IPS has also fostered financial inclusion, helping the unbanked access digital payment systems quickly and affordably.

However, when it comes to cross-border transactions, the story changes significantly. Legacy systems for international payments involve complex networks with multiple intermediaries, leading to longer processing times, high costs, and limited transparency.

The BIS sees the possibility of leveraging IPS technology to address these issues, using Project Nexus to connect IPS systems internationally and create a single, seamless framework for cross-border transactions.

Project Nexus: Enabling Instant Cross-Border Payments

Project Nexus is designed to connect IPS systems across countries, creating an integrated, standardized platform for international payments. Instead of requiring payment system operators to develop custom connections for each new country, Nexus offers a single, standardized connection. Through this model, an operator can connect once to the Nexus platform, instantly gaining access to all other IPS-connected countries.

Here’s how Nexus intends to achieve this vision:

• Single Point of Connection: By establishing one connection to the Nexus platform, an IPS can reach all participating countries. This drastically reduces the need for costly, bespoke infrastructure between individual countries.
• Standardized Protocols and Processes: Nexus introduces common technical standards for messages, data exchange, and payment processing. Each country connected to Nexus operates a “Nexus Gateway” that translates messages and formats to and from its domestic IPS standards. This interoperability allows for uniform handling of transactions and a smooth cross-border experience.
• Built-in FX Conversion: Project Nexus includes foreign exchange (FX) capabilities to handle cross-currency payments within the platform. Nexus’s FX providers offer conversion at competitive rates, allowing the sender to initiate a payment in their local currency, with the recipient receiving the funds in theirs—all within the same 60-second timeframe.
• Near-Instant Settlement: By linking IPS systems, Project Nexus aims to achieve cross-border settlements in under 60 seconds. This goal mirrors the speed of domestic IPS transactions, providing an experience that is fast and efficient, regardless of geographic borders.

Key Benefits of Project Nexus

The potential impact of Nexus on international payments is significant. Here’s how it could transform cross-border transactions for individuals, businesses, and financial institutions:

• Unprecedented Speed
  With a 60-second processing target, Nexus matches the speed of domestic IPS transactions. For businesses operating across borders, this could enhance cash flow management, reduce dependency on credit, and facilitate real-time transactions.
• Reduced Costs
  By eliminating the need for intermediary banks and standardizing the connection process, Nexus reduces the fees typically associated with cross-border payments. Lower costs make international transactions accessible to everyone, from small businesses to migrant workers sending remittances.
• Seamless User Experience
  Nexus’s standardized approach ensures that users have a consistent, predictable experience when sending money internationally. A single integration point, coupled with transparency in fees and transaction times, makes cross-border payments more reliable and easier to use.
• Financial Inclusion
  Nexus makes cross-border payments more accessible and affordable, especially for individuals in emerging economies or areas with high remittance flows. With faster, low-cost payments, migrant workers can send money home more affordably, benefiting millions of families worldwide.
• Enhanced Security and Compliance
  Built under the guidance of BIS, Nexus aligns with international security standards, including anti-money laundering (AML) and counter-terrorism financing (CTF) protocols. This allows Nexus to provide a secure platform while simplifying compliance for financial institutions.
  

How Project Nexus Works in Practice

To illustrate how Nexus functions, let’s look at a hypothetical example:

Imagine that a worker in Singapore wants to send money to family in India. Under the current system, this transaction could involve multiple banks, each adding a fee, with the entire process potentially taking days. With Project Nexus, the transaction works as follows:

• The worker initiates a payment in Singapore using their domestic IPS.
• Singapore’s Nexus Gateway translates the payment information into a standard format and sends it to India’s Nexus Gateway.
• The recipient in India receives the payment in seconds, after an automatic FX conversion facilitated by Nexus.
• Through Nexus, this process takes less than 60 seconds, costs a fraction of what it currently does, and provides full transparency on fees and timing.

Scaling Project Nexus: Challenges and Roadmap

While Nexus holds tremendous potential, it faces several challenges on its path to global adoption:

1. Standardization Across Diverse Payment Systems
   Different countries have unique IPS infrastructures, regulatory requirements, and messaging standards. Nexus will need to standardize these differences to ensure seamless communication between countries. This process will likely require extensive collaboration and investment.
2. Regulatory Compliance
   Cross-border payments are subject to regulatory scrutiny in areas like AML, CTF, and data privacy. Project Nexus will need to comply with various national regulations while maintaining high security standards, which could slow the pace of adoption in some regions.
3. Infrastructure and Technical Requirements
   Some countries lack robust IPS infrastructures or have limited technical capabilities to support Nexus’s demands. Developing these capabilities may require significant time and resources, potentially creating disparities in how quickly certain countries can join the Nexus network.

The Path Ahead: Phased Rollout and Expansion

Nexus is currently in its pilot phase, with select countries testing the framework and providing feedback. Following this pilot phase, the BIS aims to scale up the network to include more countries, refine technical requirements, and enhance the user experience.

Phases of Project Nexus Implementation:

• Pilot Testing: Select countries connect their IPS systems to Nexus, testing for efficiency, speed, and security.
• System Refinement: Based on pilot results, BIS and participating countries work together to refine standards and address any operational or technical issues.
• Network Expansion: Nexus scales up, gradually connecting more countries and regions to create a global network.
• Global Adoption: In the long-term vision, Nexus could achieve universal adoption, providing a worldwide solution for seamless, instant cross-border payments.

Project Nexus: Toward a Borderless Payment Future

Project Nexus offers a bold vision for cross-border payments, aiming to make them as simple, fast, and cost-effective as domestic transactions. By standardizing connections across IPS systems, Nexus could create a payment network that allows individuals and businesses to move money across borders effortlessly. For millions of people, including businesses, migrant workers, and consumers, Nexus has the potential to bridge financial divides and open up a more inclusive global economy.

As the pilot phase unfolds, it will be fascinating to see how Nexus overcomes its challenges, scales its network, and ultimately reshapes the landscape of international finance. In an age of rapid digital transformation, Project Nexus is a promising step toward a future where money knows no borders, and payments move as swiftly as our globalized world demands.