The Bank for International Settlements (BIS) and the Monetary Authority of Singapore (MAS) has announced the publication of a blueprint that will link the domestic real-time payment systems for international transactions as well.
The blueprint actually extends the existing link between Singapore’s PayNow and Thailand’s PromptPay and it also builds on the experience of the National Payments Corporation of India’s (NPCI) development and operation of the Unified Payments Interface (UPI) system which is basically a real-time payments system that covers a very big population.
Benoît Cœuré, head of the BIS Innovation Hub, said: “Project Nexus is trying to achieve the equivalent of internet protocols for payments systems. That means creating a model through which any country can join by adopting certain technical and governance requirements.”
The blueprint lays down the path and the framework for cooperation between the banks and payment systems of multiple countries for this to work in real-time. Though the testing and the blueprint talk about only a few countries, for now, the system could run into complexities when it expands to a large number of countries and multiple networks.
Andrew McCormack, head of the BIS Innovation Hub Singapore Centre said: “Country-to-country and regional payment connections already exist. But they require significant coordination efforts, which increase exponentially with more participants. Three countries require three bilateral links but 20 countries would require 190 bilateral links.”
Real-time payments and settlements are becoming very important for banks around the world as they have started facing some serious challenges from startups and digital payment companies which manage to do this. With international payments and remittances being one of the important revenue-earning businesses for banks, the business of banks is likely to come under serious threat and pressure if they do not address this issue immediately. For long, international payments and settlements, especially for businesses have taken very long to be processed by banks which basically operate in different languages and with very old legacy systems. This made this remittance industry ripe for the disruption which we see happening around the world now.
Banks have been forced to pick up the pace to make sure that they don’t get left behind in this disruption which is why we are seeing the focus of the banks to shift their systems into the digital world and pick up pace as far as transactions go.