The Reserve Bank of India (RBI) recently signed up for Project Nexus, through which the banking regulator aims to make instant cross-border retail payments a reality in India. Through Project Nexus, the RBI aims to interlink the Unified Payment Interface (India’s domestic Fast Payments System) with similar systems in various countries, such as Malaysia, the Philippines, Singapore, and Thailand. In the future, more countries will be added to Project Nexus to expand its reach and create a seamless payment ecosystem.
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What is Project Nexus?
Project Nexus, the brainchild of the Bank for International Settlements (BIS) aims to connect multiple domestic instant payment systems (IPS) across the globe. The RBI has been actively collaborating bilaterally with various nations to link India’s Fast Payments System (FPS) – UPI, with their respective FPSs, facilitating cross-border Person to Person (P2P) and Person to Merchant (P2M) payments.
Today, over 70 countries have domestic payment systems that enable instant transfers at almost no cost to the sender or recipient, thanks to the growing availability of instant payment systems. The BIS notes that interlinking these systems can enable cross-border payments within 60 seconds in most cases.
Despite existing bilateral collaborations, the need for Project Nexus arose due to the inefficiencies of a system dependent on individual countries securing smooth transactions. Such a system can be slow, costly, and cumbersome, highlighting the importance of a more integrated approach for efficient cross-border payments.
Countries part of Project Nexus?
For now, Project Nexus aims to connect the FPS of four Association of Southeast Asian Nations (ASEAN) members, namely Singapore, Thailand, Malaysia, and the Philippines, with India. These countries will be the founding members and first movers on the platform. An agreement to enable Project Nexus was signed between the central banks of these countries in Basel, Switzerland, on June 30th.
How will India benefit from Project Nexus?
Joining Project Nexus offers numerous benefits for India and the RBI, as well as for businesses and consumers involved in cross-border transactions.
Here are the key advantages:
1. Benefits for Businesses
Project Nexus facilitates quicker, cheaper, and more reliable cross-border payments, boosting international trade and commerce. Small and medium-sized enterprises (SMEs) in India benefit from reduced transaction costs and faster payment cycles, improving their cash flow and competitiveness in the global market.
2. Speed and Efficiency
Project Nexus significantly reduces transaction times. Domestic payments through FPS are completed in seconds. By linking these systems, cross-border payments can also be processed in under a minute.
3. Lower Costs
Cross-border payments for Indian businesses typically involve high fees for currency conversion, message translation, and sanctions screening. Project Nexus can lower these costs. With FPS participants incurring minimal fees per transaction, linking these systems keeps the overall cost of cross-border transactions low.
4. Enhanced Transparency
Traditional cross-border payments often lack transparency, with accumulating fees leading to uncertainty about the final amount received. Project Nexus offers greater transparency.
5. Expanded Reach
Project Nexus simplifies the process for Indian banks to offer cross-border payment services to more countries. Traditionally, banks need to establish and maintain correspondent accounts in each country, which is costly and time-consuming. Nexus provides a standardized framework for interlinking FPSs, expanding the reach of instant payment services.
6. Increased Reliability
Traditional banking channels for cross-border payments are prone to delays and failures, leaving senders and recipients uncertain until issues are resolved. Project Nexus improves reliability by ensuring payments are completed or failed within seconds, providing immediate feedback and reducing the risk of lost or delayed transactions.
About Razorpay Cross Border Payments
Razorpay Cross Border Payments is committed to delivering excellence, offering support for payments in over 100 currencies, affordable pricing, and a comprehensive suite including payment links and pages. With the broadest payment coverage encompassing cards, net banking, and more, along with stringent compliance standards, dedicated support, and rapid onboarding, Razorpay Cross Border Payments will ensure that businesses harness the full potential of Project Nexus for enhanced international payment capabilities and operational efficiency.
Conclusion
Project Nexus represents a transformative leap for India’s UPI system, enabling swift, cost-effective cross-border payments with enhanced transparency and reliability. This initiative will bolster international trade and streamline financial interactions, benefiting businesses and consumers alike.
