Page 29 - Banking Finance June 2025

ARTICLE

Financial Stability Board (FSB), Bank of International Settle- Banks of Indonesia, Malaysia, Thailand, Philippines, and
ment (BIS) and the Central Banks of several countries have Singapore on what is called as Project Nexus. This project
since entered into collaboration for innovations in interna- aims to build on the success of domestic instant payment
tional payments space. Multiple projects are underway systems with the potential of bringing down the time taken
across different themes as per the roadmap. We shall now in cross border payments from few days to less than 60 sec-
examine two of the most important emerging solutions in onds.
cross border payments.
Project nexus follows a standardised multilateral approach.
Cross border instant payments It acts like a hub between different instant payment systems
(IPS) where different countries need to invest in infrastruc-
Instant or fast payments such as UPI, IMPS etc are now
deeply enmeshed in the warp and weft of the lives of users ture and resources to be able to connect and communicate
with Nexus instead of following the process for each coun-
of financial services. Consumers want to be able to make
payments instantly and in a frictionless manner. This has try repeatedly.
resulted in a growing clamour for the same experience in
case of cross border payments too. Similarly, institutions and Figure 2: Nexus Gateways connect IPS to
firms also want to be able to send and receive payments each other, across borders
for their trades just by using their mobile phones and get
real time payments.

Growth of digital wallets, mobile banking and the rise of
embedded finance where one can make payments through
a third-party app without requirement of logging in to one's
Bank internet banking are some of the chief trends. Many
fintechs are offering instant cross border payments through
their wallets. However, they have issues of their own where
it may not be possible to get instant cross border payments
unless both the sender and receiver are customers of same
entity.

In cross border payments, an important prerequisite is con-
nection and interoperability between the instant payment
systems of two different countries. In a fragmented land-
scape, these systems work on different platforms, follow
separate regulations, protocols and designs, and cannot be
easily connected. Some of the countries in Southeast Asia
like Singapore and Thailand have already interlinked their Source: bis.org
instant payment systems PayNow and PromptPay respec-
tively. Similarly, India has also interlinked UPI with Once connected to Nexus, the IPS & the PSPs of member
Singapore's PayNow. Both of which enable payments based countries will be able to connect to IPS of any other mem-
on mobile numbers. However, interlinking with a greater ber country without any additional investments or costs.
number of countries immediately necessitates creation of a
complex platform infrastructure and involves scale related Both P2P, B2B as well Person to Business and Business to
problems. Person payments can be made in Nexus. However, the pay-
ment size is dependent on the payment cap set by the do-
Under G-20 roadmap, interlinking of instant payment sys- mestic IPS so currently Nexus does not support wholesale
tems (IPS) is a priority to improve the speed, cost, accessi- payments between two institutions and is more likely to be
bility, and transparency of cross border payments. BIS Inno- used for relatively smaller payment sizes. Also, as of now only
vation Hub at Singapore has been working with Central payments in the currency of source and destination IPS can

26 | 2025 | JUNE | BANKING FINANCE