The recently-published report outlines the results of a year-long partnership between the Bank of Italy, the Central Bank of Malaysia (BNM), the Monetary Authority of Singapore (MAS), and payment systems operators PayNet and Banking Computer Services (BCS).
The collaboration involved test payments using mobile phone numbers or recipients' company registration numbers via the Eurosystem's TARGET Instant Payment Settlement (TIPS), Malaysia's Real-time Retail Payments Platform (RPP), and Singapore's Fast and Secure Transfers (FAST) payment system.
The Nexus project aims to support the G20's priority of improving the transparency of cross-border payments by connecting domestic payment systems (IPS) across multiple countries through a standardised and multilateral approach. The report provides details of the early experiments and technical specifications for the multilateral interlinking of payment systems.
For the next phase of the project, Bank Indonesia (BI), BNM, Bangko Sentral ng Pilipinas (BSP), MAS, and the Bank of Thailand plan to leverage their experiences from the initial phases of the project to connect their countries' IPS and facilitate cross-border transactions across a combined population of approximately 500 million people. Moreover, The Singapore Centre of the BIS Innovation Hub will work alongside the central banks to facilitate their design processes as they aim to connect their domestic payment systems.
Sopnendu Mohanty, Chief Fintech Officer at MAS, stated that the successful Nexus prototype between Singapore, Malaysia, and the Eurosystem is proves the technical viability of multilateral instant payment systems connectivity. Meanwhile, Bank of Italy Deputy Governor Piero Cipollone noted that connecting three payment systems indicates for Nexus the prospect of it being key step forward in the G20's agenda of improving cross-border payments.
The BIS and the five central banks envision that Nexus could eventually be implemented globally, with a Global Advisory Panel of central banks and payment system operators established to advise on the project's development beyond Southeast Asia. The Bank of Italy and the European Central Bank will be invited to join this panel.
As explained by the BIS, there are more than 60 instant payment systems around the world, which typically allow people to send money to each other within seconds. However, they are all domestic and international payments that remain opaque, slow and expensive. BIS representatives postulate that trying to connect domestic systems bilaterally with other countries would be expensive and complex, generating an exponential number of links.
Therefore, the Nexus concept is of a standardised and multilateral network designed to accommodate the many differences between national systems. Rather than a payment system operator building custom connections for every new country that it wishes to connect to, it needs to establish only one connection to the Nexus network.
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