The Monetary Authority of Singapore (MAS) and the Bank for International Settlements (BIS) Innovation Hub Singapore Centre have teamed up to publish a blueprint for enhancing global payments connectivity. This will be done via multilateral links between countries’ national retail payment systems, MAS said.
The project, titled Nexus, outlines how countries can integrate their retail payment systems into a single cross-border network and allow customers to make international transfers instantly and securely through their mobile phones or internet devices.
Project Nexus is trying to achieve the equivalent of internet protocols for payments systems, according to Benoît Cœuré, head of the BIS Innovation Hub. “That means creating a model through which any country can join by adopting certain technical and governance requirements,” Cœuré said.
“Country-to-country and regional payment connections already exist,” said Andrew McCormack, head of the BISIH Singapore Centre.
“But they require significant coordination efforts, which increase exponentially with more participants. Three countries require three bilateral links but 20 countries would require 190 bilateral links.”
The project comprises two main elements. Firstly, Nexus Gateways will be developed and implemented by the operators of participating countries’ national payment systems. Nexus Gateways will serve to coordinate compliance, foreign exchange conversion, message translation and the sequencing of payments among all participants.
“These gateways will be predicated on a common set of technical standards, functionalities and operational guidelines set out within the proposal,” MAS said.
Secondly, an overarching Nexus Scheme will be rolled out. The scheme will set out the governance framework and rulebook for participating retail payment systems, banks and payment service providers to coordinate and effect cross-border payments through the network.
Under the Project Nexus, participating countries will only need to adopt the Nexus protocols once to gain access to the broader crossborder payments network. “This removes the need for countries to negotiate payment linkages with each jurisdiction on a bilateral basis,” MAS said.
The Nexus blueprint was developed via extensive consultation with multiple central banks and financial institutions across the globe, MAS said.
It builds on the pioneering bilateral link between Singapore’s PayNow and Thailand’s PromptPay launched in April 2021, and benefits from the experience of the National Payments Corporation of India’s development and operation of the Unified Payments Interface system.
“The blueprint can be built upon through continued research and engagement with regulators, payment operators, banks, and other industry participants collaborating towards a technical proof-of-concept,” MAS said.
To achieve significant cost-reduction in cross-border payment transfers, enhancements must be made on two fronts: direct connectivity between domestic faster payment systems, and frictionless foreign exchange on shared common wholesale settlement infrastructures, according to Sopnendu Mohanty, chief fintech officer at MAS.
“The BIS Innovation Hub Singapore Centre is working on both,” Mohanty said. “The Nexus Project maps out a much-needed set of standards to achieve seamless cross-border payment systems connectivity.”
Written by: Zeng Yixiang, Regulatory Intelligence Correspondent for Southeast Asia, Thomson Reuters