The Nexus international payments platform: is it business model viable?

This paper describes and critically examines the BIS Technology Hub project Nexus. Nexus is a response to concerns about the relatively slow pace of innovation in international payments, in contrast to the rapid adoption of new technologies and development of new services in domestic payments, including ‘instant’ payment platforms (IPS). It is a ‘proof of concept’ for a messaging platform that can support near realtime international payments, by linking together domestic IPS, both those now already established and those planned for launch. Two aspects of Nexus are distinguished: (i) the innovations in technology and messaging standards to support IPS services internationally, deal with AML and sanctions compliance and support transparency of foreign exchange pricing and payments charges; (ii) its novel organisational architecture with two associated new business models for execution of international payments. It is unclear that these new business models, for provision of supporting foreign exchange services and for offers of competitive pricing to be communicated by sending banks to their customers, will be commercially viable. It is also ambiguous to what extent improvement of international payments need to be based on new operational architectures rather than evolutionary enhancement of existing correspondent banking-based arrangements. Therefore, our recommendation is that these two aspects of Nexus should be developed separately, allowing banks and payment services providers freedom to the choices of using Nexus messaging in their existing bilateral commercial and operational relationships to support the linkage of domestic IPSs, as well as using the Nexus platform itself, if and when it achieves a commercial launch.