Context:
Recently, RBI Joined Project Nexus to facilitate seamless cross-border transactions by linking domestic Fast Payment Systems (FPSs) of the countries.
What is Project Nexus about?
Concept and Objective: Project Nexus is a multilateral international initiative, conceived by the Innovation Hub of the Bank for International Settlements (BIS). It aims to improve cross-border payments by linking multiple domestic instant payment systems (IPS) globally.
- This initiative marks the first BIS Innovation Hub project in the payments sector.
- The platform will likely go live in two years, i.e. 2026.
India’s Involvement: The RBI collaborates bilaterally to link India’s UPI with other countries Fast Payments System (FPSs) for cross-border P2P (Person to Person) and P2M (Person to Merchant) payments.
- A multilateral approach will further support the RBI’s efforts to extend the international reach of Indian payment systems.
Benefits of Instant Payment Systems (IPS): In more than 70 countries, domestic payments are processed within seconds at near-zero cost to the sender or recipient, thanks to the widespread availability of instant payment systems.
- According to BIS, interlinking these IPS can facilitate cross-border payments from sender to recipient within 60 seconds in most cases.
Advantages of the Platform
- It aims to standardize the interconnection of IPS globally.
- Instead of each payment system operator creating custom connections for every new country, operators can establish a single connection to the Nexus platform.
- This streamlined approach enables fast payment systems to access all other countries within the network.
- Project Nexus can potentially expedite the expansion of instant cross-border payments.
Participant countries
- Project Nexus aims to link the Fast Payment Systems of Malaysia, Philippines, Singapore, Thailand, and India as founding members, with an agreement signed in Basel, Switzerland, by the BIS and the central banks of these countries.
- Indonesia is also slated to join the platform in the future.
- The platform also holds the potential for future expansion to include additional countries.
Bank for International Settlements (BIS)
- Established in 1930 through the Hague Agreements, it is an international organization that supports central banks’ pursuit of monetary and financial stability through international cooperation
- It is owned by the 63 Central banks, including the Reserve Bank of India (RBI), of Member Countries
- It is sometimes referred to as the central bank for central banks
- Headquarters: Basel, Switzerland.