2nd July 2024 (9 Topics)
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Project Nexus
Context
The Reserve Bank of India (RBI) has joined Project Nexus, a multilateral international initiative to enable instant cross-border retail payments by interlinking domestic Fast Payments Systems (FPSs). India’s Unified Payments Interface (UPI) and FPSs of Malaysia, the Philippines, Singapore and Thailand will be interlinked through Nexus. Going ahead, the platform can be extended to more countries.
What is Project Nexus?
- Project Nexus is a multilateral international initiative among central banks and financial authorities to enable instant cross-border retail payments.
- Initiated by: Innovation Hub of the Bank for International Settlements (BIS)
- It is the first BIS Innovation Hub project in the payments area to move towards live implementation
- It focuses on linking domestic instant payment systems (IPS) globally, enabling near-instantaneous transactions between countries.
- Founding members of Project: Central banks of India, Malaysia, Philippines, Singapore, and Thailand.
- The platform standardizes the connection process, making it easier for countries to join and allowing for rapid expansion of cross-border payment capabilities.
- Key Objectives
- Standardization of IPS Connections: Instead of creating custom connections for each country, Nexus provides a unified platform where a single connection enables access to all member countries.
- Facilitation of Instant Cross-Border Payments: By interlinking FPSs, Project Nexus aims to reduce the time and cost associated with cross-border transactions, aiming for transaction times within 60 seconds in most cases.
- The platform is expected to go live by 2026.
Benefits of Project Nexus
- Enhanced Efficiency: Standardized connections streamline the process of linking domestic FPSs, reducing the complexities involved in establishing cross-border payment networks.
- Reduced Costs: Near-zero costs to both senders and recipients are expected due to the efficiency gains and elimination of intermediary fees associated with traditional cross-border transactions.
- Improved Accessibility: Enables broader access to instant cross-border payments, promoting financial inclusion and facilitating smoother international transactions for individuals and businesses alike.
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