> ## Content Index > Fetch the complete content index at: https://www.upscprep.com/llms.txt > Use this file to discover other available public pages before exploring further. # What is Project NEXUS? - URL: https://www.upscprep.com/what-is-project-nexus-rbi-upsc-current-affairs/ - Published: 2024-07-03T18:07:28.000Z - Updated: 2024-07-03T18:07:28.000Z - Description: GS3 | Economic Development | Banking - Author: UPSCprep.com - Tags: Economy, Current Affairs, #show-toc ### **Why in the News?** **Event**: The Reserve Bank of India (RBI) has joined Project Nexus. **Initiative**: This is a multilateral international initiative aimed at enabling instant cross-border retail payments by interlinking domestic fast payment systems. ![BIS-Led Project Nexus Completes Phase 3 Blueprint for Cross-Border Instant Payments | UPSC](https://fintechnews.my/wp-content/uploads/2024/07/BIS-Led-Project-Nexus-Completes-Phase-3-Blueprint-for-Cross-Border-Instant-Payments-1440x564_c.jpg) - An agreement was signed by the **Bank for International Settlements (BIS)** and the **central banks of India**, **Malaysia**, **Philippines**, **Singapore**, and **Thailand** on June 30, 2024, in Basel, Switzerland. - **Indonesia**, which has been involved from the early stages, continues to be involved as a special observer. ![Project Nexus completes comprehensive blueprint for connecting domestic instant payment systems globally and prepares for work towards live implementation](https://www.mas.gov.sg/-/media/mas-media-library/news/media-releases/nexus-phase-logos.png?h=167&w=1563&hash=AF641109FF653C8A60BE816A905DA61C) - **Collaboration**: The RBI has been collaborating bilaterally with various countries to link India’s fast payments system — **Unified Payments Interface (UPI)**, with their respective domestic fast payments systems for **cross-border** Person-to-Person **(P2P)** and Person-to-Merchant **(P2M)** payments. **Bilateral vs. Multilateral Connectivity**: While bilateral connectivity has benefits, a multilateral approach like Nexus could further enhance the international reach of Indian payment systems. ### **Background** - **Development**: In **2021**, the **BIS Innovation Hub (BISIH)** Singapore Centre developed a blueprint for connecting instant payment systems across borders. - **Prototype**: In **2022**, a working prototype of Nexus was built, connecting the test systems of **Eurosystem’s TIPS**, **Malaysia’s RPP**, and **Singapore’s FAST** payment system. - **Usability**: Nexus focuses on usability, allowing the use of proxies like mobile phone numbers to address cross-border payments without needing long IBANs or local account details. - **Proxy Services**: The prototype connected services like TIPS’s Mobile Proxy Lookup, Malaysia’s DuitNow, and Singapore’s PayNow. ### **What is Project Nexus?** ![What is Project Nexus? | RBI | UPSC](https://storage.ghost.io/c/92/07/9207d054-5e99-4b26-b8c8-424994497a07/content/images/2024/07/image-9.png) - Project Nexus is conceptualised by the **Innovation Hub** of the **Bank for International Settlements (BIS)**. - It aims to enable **instant cross-border payments** by connecting multiple domestic instant payment systems globally. - The project explores how to build on the success of domestic instant payments to **improve the speed, cost, transparency** and **accessibility** of cross-border payments. - The project has produced a comprehensive blueprint for standardising the way that domestic instant payment systems connect, lowering the obstacles for countries that wish to offer instant cross-border payments. In over **70 countries** today, domestic payments reach their destination in seconds at near-zero cost to the sender or recipient. *This is thanks to the growing availability of instant payment systems.* ![](https://storage.ghost.io/c/92/07/9207d054-5e99-4b26-b8c8-424994497a07/content/images/2024/07/image-8.png) Connecting the instant payment systems to each other can enable cross-border payments from sender to recipient **within 60 seconds** (in most cases). --- ![](https://storage.ghost.io/c/92/07/9207d054-5e99-4b26-b8c8-424994497a07/content/images/2024/07/1.-UPSCprep-Banner-3.png) [Join Now](https://courses.upscprep.com/products?ref=upscprep.com) --- ### **Working of NEXUS** Nexus is designed to standardise the way that instant payment systems connect to each other. ![ Nexus platform | RBI | NSO | UPSC](https://storage.ghost.io/c/92/07/9207d054-5e99-4b26-b8c8-424994497a07/content/images/2024/07/image-10.png) - Rather than a payment system operator building custom connections for every new country that it connects to, **the operator can make one connection to the Nexus platform**. - This single connection allows a fast payment system to reach all other countries on the network. ![](https://www.paymentscardsandmobile.com/wp-content/uploads/2024/07/Project-Nexus-Instant-Payment-connectivity-1024x657.jpg) Nexus could significantly accelerate the growth of instant cross-border payments. - This has been a collaborative effort between the **BIS Innovation Hub (BISIH)** and **interested central banks** and instant payment systems that has been developed and refined over three phases of work. ### **Future Phases** - In the next and **final phase of Nexus**, the BISIH will support a coalition of countries interested to implement Nexus. - **Phase four** will see central banks of **Malaysia**, **Philippines**, **Singapore**, **Thailand** and domestic instant payment systems who worked together in phase three joined by the Reserve Bank of India, expanding the potential user base to India's Unified Payments Interface (UPI). - Going forward, the platform can be extended to more countries. **It is expected to go live by 2026.** The coalition of countries have agreed to work towards establishing a new entity, the **Nexus Scheme Organisation (NSO)**, which will be responsible for managing the Nexus scheme and its rulebook. ![ Proposed structure of the Nexus Scheme Organisation (NSO)](https://storage.ghost.io/c/92/07/9207d054-5e99-4b26-b8c8-424994497a07/content/images/2024/07/image-6.png) Proposed structure of the **Nexus Scheme Organisation (NSO)** - While the BIS will not own or operate the NSO, it will continue its support by playing an advisory role as participating countries work towards taking Nexus live. ### **Benefits of Nexus** **Speed** - **Current Scenario**: Traditional cross-border payments are slow due to dependency on multiple banks and central banks' operating hours. - **Nexus Advantage**: Cross-border payments can be completed in 60 seconds or less, operating 24/7/365. - **Design Principle**: Payments should be completed within 60 seconds. **Cost** - **Current Scenario**: High costs due to the need for correspondent accounts and routing through larger banks. - **Nexus Advantage**: Lower transaction fees and reduced administrative costs by eliminating the need for correspondent accounts. - **Design Principle**: Lower barriers to entry and reduce administrative costs. **Access** - **Current Scenario**: Limited by financial inclusion and correspondent banking relationships. - **Nexus Advantage**: Access through non-bank PSPs and simplified processes using proxies like mobile numbers. - **Design Principle**: Anyone who can send/receive domestic payments should be able to do so cross-border through Nexus. **Transparency** - **Current Scenario**: Variable fees and uncertainty about the final amount received. - **Nexus Advantage**: Upfront fee calculation and immediate payment status updates. - **Design Principle**: Fees and FX rates should be shown upfront, and the sender should know the exact amount credited to the recipient. **Safety, Security, and Resilience** - **Current Scenario**: Cross-border credit risk due to correspondent banking relationships. - **Nexus Advantage**: Builds on existing IPS risk management frameworks, reducing reliance on correspondent banking and mitigating cross-border credit risk. - **Design Principle**: Reduce cross-border exposure and rely on domestic IPS settlement arrangements. Interlinking IPS through Nexus enhances the efficiency, cost-effectiveness, accessibility, transparency, and security of cross-border payments, aligning with the Financial Stability Board’s (FSB) targets. *Source:* [*BIS Innovation Hub*](https://www.bis.org/innovation%5Fhub/projects/nexus%5Fbrochure.pdf?ref=upscprep.com) ## Sign up for UPSCprep.com Simplify your UPSC journey Subscribe Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime.