Nexus could be banking's next big thing, inspired by Indian payments system

 Nexus will be like a worldwide web of payments, a set of rules any country can adopt.

In the age of smartphones, international wire transfers belong in money museums.

In more than 60 countries, including many developing nations, it has become incredibly easy to send funds in real-time to someone else over the internet--knowing nothing more than their mobile phone number.

However, 24/7 fast payment systems, a technology that’s starting to work pretty well for small-value transfers in domestic situations, have no counterpart when money has to jump over national borders.

For a bank to move funds from one country to another, it needs to either have a presence in both or keep idle funds to maintain “correspondent” relationships with other financial institutions in the middle. Payments take at least a few hours and sometimes get stuck for days because of a typo in the beneficiary’s name, address, or account number. This is when we wish we could just whip out our phones and pay an individual or a merchant in another part of the world on the spot by using only their phone number.

That’s why, in the coming months and years, we’ll probably hear more about Nexus, currently a blueprint drawn up by the Bank for International Settlements’ innovation hub.

Transfers are expensive. The global average cost of sending $200 was 6.4% in the first quarter of 2020, according to the World Bank. Fintech firms like Wise Plc (formerly known as TransferWise) and crypto players like Ripple Labs Inc. have, in their own ways, tried to address the problem of high costs. One reason to welcome the upcoming official digital currencies is that several of them can share a technical bridge and allow participating central banks to clear one another’s IOUs. Users will gain from an instantaneous settlement. Even in cross-border situations.