BIS multilateral instant payments become reality in Asia-Pacific

The Bank for International Settlements (BIS)-led Project Nexus has made instant cross-border payments a reality, with the launch of Nexus Global Payments (NGP) in five Asia-Pacific (APAC) jurisdictions.

The BIS established Singapore-based NGP in April. The not-for-profit corporation has been testing the system for the “first mover” countries — India, Malaysia, the Philippines, Singapore and Thailand — and managing the technical infrastructure and day-to-day operations.

Nexus will enable cross-border payments in seconds, around-the-clock. “It is a game-changer. Nexus brings us the tangible improvement, the visible impact,” said Bank of Thailand (BoT) assistant governor Daranee Saeju, at the recent Singapore Fintech Festival (SFF).

“For example, Thailand sends and receives around $12 billion in remittances annually. The average cost of cross-border payments is 6%, according to the World Bank. For every 1% reduction in cost, we could save $120 million — that’s more money for your loved ones.”

Initiated as an experiment in 2021, the full operation is expected to go live in the five countries by 2026.

Operating system

Nexus is a “behind-the-scenes” service, enabling cross-border payments in 60 seconds or less between banks in participating countries. Customers using it are not required to download a separate application, as it will be integrated into their existing local mobile banking system, according to a BIS report in July 2024.

Senders will use a phone number, national ID number or virtual payment address as a “proxy” for account details but the name of the recipient will appear before confirming the transaction.

Nexus utilises domestic instant payment systems (IPSs) by engineering them into a network to support both person-to-person (P2P) and person-to-merchant (P2M) payments. The system uses a standardised method, translating local financial messaging into the ISO 20022 format.

While the project is starting out in Southeast Asia and India, it has the potential to expand beyond them. “Nexus is very clever, in the sense that it has a central switch and every country can hook in. Once you are connected, you can get benefits from all the countries that are already connected,” Saeju said.

Compliance approach

Nexus is designed to be compliant with domestic regulatory requirements, respecting each jurisdiction’s monetary and financial stability policies.

Speaking at the SFF, Monetary Authority of Singapore (MAS) deputy managing director Leong Sing Chiong explained: “Singapore has been announced as the ‘home jurisdictionʼ for the Nexus Scheme Organisation (NSO). What this means is that the MAS will take the lead role for the oversight of Nexus.

“[We are still] developing a governance framework, which will blend public policy considerations with private sector agility.”

Participating banks, payment services providers (PSPs) and relevant entities must also comply with anti-money laundering and countering the financing of terrorism (AML/CFT) requirements.

“Within the system, the ability to detect and disrupt frauds and scams must also be ramped up. Different central banks are looking very seriously at this [matter]. The first priority is to be able to carry out surveillance, detect and disrupt and recover funds, on a real-time basis,” said Leong.

In some instances, Nexus will use the account information to verify that the recipient is registered in the database and capable of receiving cross-border payments, and may contact the destination PSP as part of the “account resolution” process. If the destination PSP provides the requested information, it is passed back to the sender’s PSP. This process helps ensure all necessary compliance and sanctions checks are carried out, said the BIS report.

One multilateral network

By interlinking IPSs across APAC states, the BIS aims to transform domestic payments into a multilateral seamless system in which everyone is a customer on the same network, regardless of location.

The European Central Bank (ECB) announced that it will join Nexus as a “special observer”, with the potential to become a participant in the future, according to Leong at the MAS. “The ECB is not new to Nexus, having previously involved in the technical proof of concept alongside Singapore and Malaysia.”

While the large scale of Nexus adds complexity, APAC countries, particularly in Southeast Asia, have successfully connected two IPS networks since 2021.

Singapore’s PayNow and Thailand’s PromptPay formed the first bilateral IPS in April 2021, enabling customers of participating banks to send money across the border with just the recipient’s mobile number. This system was later developed into a technology that allows customers to make low-cost, instant payments to merchants or among peers by scanning a QR code.

In October 2021, Euro Banking Association (EBA) Clearing announced a similar project, the Immediate Cross-Border Payments (IXB) initiative, in collaboration with the US Clearing House and the Society for Worldwide Interbank Financial Telecommunication (SWIFT).

IXB is seeking to create a US dollar-euro instant payments system, with contributions from 11 major European and US banks, EBA Clearing said in a statement. The initiative remains in the development stage.