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The Nexus international payments platform: Is it business-model viable?
This paper examines the BIS Technology Hub's Nexus project. Nexus is a proof-of-concept for a messaging platform that supports near real-time international payments by linking together domestic ‘instant’ payment platforms. Two aspects of Nexus are distinguished: (1) the innovations in technology and messaging standards to support instant payment services internationally, deal with anti-money laundering and sanctions compliance, and support transparency of foreign exchange pricing and payments charges; and (2) its novel organisational architecture with two associated new business models for the execution of international payments. As the paper will discuss, it is unclear whether these new business models will be commercially viable. Likewise, the extent to which the improvement of international payments must be based on new operational architectures rather than the enhancement of existing correspondent banking-based arrangements remains uncertain. The paper therefore argues that these aspects should be developed separately, so that banks and payment services providers are free to use Nexus messaging in conjunction with their existing bilateral commercial and operational relationships to support the linkage of domestic instant payment platforms, as well as to use the Nexus platform itself, if and when it achieves a commercial launch.
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Chusu He is a lecturer in finance at the University of Bath. Her research interests include FinTech, financial markets and regulation, risk management and public finance. She is also a member of the European Money and Finance Forum, and serves as a reviewer for Public Management Review, International Journal of the Economics of Business, Journal of International Financial Markets, Institutions & Money and Financial Innovation.
Alistair Milne is Professor of Financial Economics at the Loughborough University School of Business and Economics. His current research focus is data and related technologies in money and financial services, but has historically included financial technology, money and central banking, bank capital and risk management, macroeconomics, financial regulation and dynamic stochastic optimisation. He has a PhD in economics from the London School of Economics.
Markos Zachariadis is Professor of Information Systems and Chair of Financial Technology at the Alliance Manchester Business School. He is a member of the World Economic Forum's Global Future Council on Financial & Monetary Systems; Chief FinTech Adviser to the President of the Hellenic Competition Commission — the Greek competition and markets authority; and a FinTech Research Fellow at the Cambridge Centre for Digital Innovation at the University of Cambridge.