Model builds on successful connection of Singapore and Thailand’s national payment networks.
The Bank for International Settlements Innovation Hub Singapore Centre and the Monetary Authority of Singapore (MAS) today published a proposed blueprint for enhancing global payments network connectivity via multilateral linkages of countries’ national retail payment systems.
Titled Project Nexus , this blueprint outlines how countries can fully integrate their retail payment systems onto a single cross-border network, allowing customers to make cross-border transfers instantly and securely via their mobile phones or internet devices.
The Nexus blueprint comprises two main elements:
Nexus Gateways, to be developed and implemented by the operators of participating countries’ national payment systems, 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.
An overarching Nexus Scheme that sets 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 Nexus blueprint, participating countries will only need to adopt the Nexus protocols once to gain access to the broader cross-border payments network. This removes the need for countries to negotiate payment linkages with each jurisdiction on a bilateral basis.
“Project Nexus is trying to achieve the equivalent of internet protocols for payments systems. That means creating a model through which any country can join by adopting certain technical and governance requirements,” said Benoît Cœuré, Head of the BIS Innovation Hub.
The Nexus blueprint was developed through extensive consultation with multiple central banks and financial institutions across the globe. It builds on the pioneering bilateral linkage 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 (NPCI) development and operation of the Unified Payments Interface (UPI) 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.
“Country-to-country and regional payment connections already exist,” notes 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.”
This blueprint will bring like-minded regulators and instant payments operators along with global bodies like the G20 and the Committee on Payments and Market Infrastructures (CPMI) together to make real-time cross-border payments a reality in the next two to four years, said Sopnendu Mohanty chief FinTech officer at MAS.
“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,” he said. “The BIS Innovation Hub Singapore Centre is working on both. The Nexus project maps out a much-needed set of standards to achieve seamless cross-border payment systems connectivity.”
Around 60 countries now have instant payment systems, which allow payments between bank accounts in just seconds. Connecting them together could enable cross-border payments that are faster, cheaper, easier to access and more transparent. The project complements the ongoing work of the G20, FSB and CPMI to enhance cross-border payments.
Purpose of the Service Level Description (SLD)
Nexus aims to connect local IPS systems in a seamless and transparent way. However, the various IPS systems around the globe are not designed according to the same standards and rules. For example, there are significant differences in:
The format of the primary account numbers
The types and formats of alias accepted
The maximum value that can be sent
How long after a payment can a dispute be issued
In order to facilitate payments in a transparent manner, Nexus will retrieve and store the local variations in a template file called a Service Level Description (SLD).
Each IPS will be responsible for defining its SLD and sharing it with Nexus, as well as updating Nexus when any details of the SLD change (for example, if the limit on payment size is changed).
As soon as the Sender selects the Destination Country, the Source Bank can retrieve the SLD for the Destination IPS. This tells the Source Bank what information it must collect from the Sender.
Nexus will validate the requests from the Source IPS against the SLD of the Destination IPS and act accordingly. This means request which are invalid per the Destination IPS will be rejected by the Nexus Gateway.
Setup: Synchronising Service Level Descriptions
The Source Bank needs to be aware of the specific requirements and functionality of the Destination IPS and its member banks, so that it can collect the correct information from their customer. For example, the Source Bank needs to know the primary account format, which alias formats are accepted (if any), the maximum payment size that can be sent and whether confirmation of payee is possible.
The requirements and functionality for each IPS are recorded in a simple Service Level Description (SLD) file. (See IPS Service Level Descriptions for the full SLD specification.)
SLDs must be synchronised across the Nexus network, so that the Source Gateway can quickly provide the SLD information for any Destination IPS to the Source Bank.
Each IPS is responsible for updating their local Nexus Gateway with any changes made to its SLD (1). These changes are likely to be infrequent (less than monthly). For example, if the maximum payment size for cross-border payments into the country is changed, that IPS must update its SLD and share this with the local Nexus Gateway. The local Nexus Gateway will then distribute the updated SLD with every other Nexus Gateway in the network.