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.</p

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.</p

Central bank digital currencies and international payments

This paper – drawing on interviews with twenty-two senior payments professionals – documents the business processes employed in the execution of international payments and discusses how international payments might be improved through the adoption of central bank digital currencies (CBDC). This was a substantial exercise resulting in a lengthy research paper. This executive summary presents the key insights. The motivation for this research is the focus of the industry on reducing costs, increasing speed, widening access and improving transparency of cross-border payments. An April 2020 report of the Financial Stability Board for the G20 (FSB, 2020) identifies some of the issues that need to be addressed: “fragmented data standards or lack of interoperability; complexities in meeting compliance requirements, including for anti-money laundering and countering the financing of terrorism (AML/CFT), and data protection purposes; different operating hours across different time zones; and outdated legacy technology platforms”. To many observers technology has developed to the point where an international payment, to any destination, can and should be as straightforward as sending an email. This perception is reinforced by the observation that instant global payments can be made already using cryptocurrencies such as Bitcoin. So, it should be easy to do the same using CBDC, the fiat equivalent of cryptocurrencies. A July 2021 report by the BIS, the World Bank and the IMF to the G20 (BIS et al., 2021) discusses the technical aspects of this. They consider arrangements for direct exchange of CBDCs of different fiat currencies, referring to these multiple CBDC exchanges as mCBDC. They consider several possible forms and applications of mCBDC in international payments. Our focus on business processes highlights a different question, not addressed by (BIS et al., 2021). What is the nature of the CBDC opportunity in international payments? Is it: a) Enhancement: One of several current incremental technology developments, supporting gradual improvement in arrangements for making international payments, without fundamentally changing underlying business processes OR b) Transformation: An opportunity for fundamental redesign of the architecture of international payments, radically simplifying business processes so that international payments can be made as directly and efficiently as domestic payments?</p

Identification as infrastructure: the challenges of establishing the Legal Entity Identifier data standard for financial markets

[First paragraph] This paper seeks to explore the central concern of the sub-theme to explore the notion of infrastructure as resource and tool in order to rethink organizations and processes of organizing. It does this through the presentation of a research-in-progress study of an initiative to establish a de facto as well as de jure identification infrastructure for financial markets around the development and adoption of a common global digital identifier for market participants to be used in the conclusion and reporting of financial transactions