Innovation to Implementation: Project Nexus Case Study | DC Fintech Week 2025

Uh this session will be about project Nexus which was mentioned by Han in the early in the morning. So [snorts] the speaker will be Maha El Daki. Uh she is the head of the innovation hub Singapore center of the BIS. She started the position in October 2023 and before that appointment she was head of the department for early and high growth oversight at the UK financial conduct authority FCA leading a team in charge of providing supervisor support for startup firms in the UK and before that she headed the FCA's payment department and served as chief payments officer at pay.uk UK, the UK's operator of retail interbank payment systems and Maha joined the FCA in 2017 to set up the first payments department and she was responsible for crafting and implementing the FCA supervisory strategy for the UK payment sector and she also has your position in the commercial banks before.

So I'm very happy that she'll give us some insight on how the project Nexus can enhance cross border payments. Uh the floor is yours.

Thank you very much Elio. Really appreciate that. I I think I I was going to stand up but it feels like it's probably better to stay seated. So um Project Nexus is now actually in handover. Uh it's going to um a new entity has been set up.

It's owned by five central banks and we're very pleased to be um a partner in the handover process. But once uh it's implemented, it's a you know an independent um entity. Uh and so what I wanted to talk about here is actually some of the lessons learned from taking something from an idea to full implementation and and um I've got a few slides to show you um here. So we'll talk a bit about sort of project Nexus um the uh headline of what it does um but also we'll talk about you know what made it this candidate to move from a a concept to full implementation um and you know whilst we we think about new ideas whenever we're uh you know innovating you have to start with an idea you have to start somewhere but often there's still you know certain gaps and you know where do you go from from uh from now that Nexus is implemented well what what could be next. So um when we looked at incubating Nexus, I think the key thing was you know what was the unique selling point that Nexus can bring and there were bilaterals uh uh uh interlinking instant payment systems on a bilateral basis in Asia that were happening um at at speed and they were becoming popular but obviously they're not scalable if every time you know you need to to set up a bilateral if you you want to do that with with 10 countries it becomes quite difficult.

anything uh we heard over two becomes quite difficult. And so you know we we looked at um wouldn't it be a good idea to actually look at a multilateral sort of hub where if the instant payment system connects once it connects to all of the other instant payment systems that are connected to that hub. Um it also takes the the really popular instant payment system infrastructure that already exists and this is what the bilaterals have done. and they've proven that you know you can take advantage of this infrastructure that's already there that's proliferating around the world uh to look at you know enhancing uh retail crossber payments and and we needed to make sure that you know it's a it's a project that also delivered on the G20 target roadmap for crossber payments um and I'll talk a little bit about that um in a in a moment but crucially when we're thinking of using insta payment infrastructure as sort of the base we also needed to make sure that this was a public private partnership. Um so we had guiding principles and this is these were specifically they came to the four when we started to look at the blueprint.

Um and but it was important to have guiding principles that really guided all of our different work streams for this work throughout the journey of of um uh Nexus moving from sort of a proof of concept to implementation and and these were the six guiding principles public policy goals. I mean this is what central banks were um interested in obviously you know what the the the public policy sort of sentiment needed to be at its heart but it also needed to be inclusive inclusive for uh users for consumers using it but also for those um participants in the ecosystem that need to be part of the nexus ecosystem. Um it had to be neutral so it wasn't necessarily favoring one one group over the other. Um, financial sustainability was something very important. Um, you know, when you're building a structure like this, it can't be uh we didn't want it to be continued to be funded by grants or or or government money.

It it had to stand on its own two feet. So, the the design took that into account, but it also had to be agile. So, you know, modular, how do we uh how do we make sure that it it can interoperate different instant payment systems around the world, etc. Um, and and obviously scalability was very important. when you're setting up a structure, we always think about the global reach of that structure.

And so scalability was at the heart of all of the different work streams. And I'll I'll talk to that in a moment. So we went from the technical blueprint to a proof of concept. And a lot of those principles that I just mentioned really came to the four when we looked at the comprehensive blueprint. The proof of concept wasn't production ready.

So it proved basically that you can link three um instant payment systems. In this case, it was the Euro systems uh tips uh pay now in Singapore and do it now in Malaysia through a hub. Techni it's technically feasible to send instant payment systems between one and the other if they all connect into the one hub. But it wasn't um uh it wasn't production ready. So the blue the comprehensive blueprint is what uh we we built to make sure that we build a production ready framework for taking this into the real world.

And then obviously phase four which we're in now, it's the handover phase. You could see there the five central banks and our previous general manager Augustine Casten's um uh kind of signing the agreement that we will hand this over and they will take it away and and um and and set it up. Uh and um so and that this is this has kind of kicked off the um and new entity being established and so on. So um you know w with the blueprint uh we we started with the five uh central banks in the AAN region um you can see there Singapore, Indonesia, Philippines, Thailand and Malaysia. But crucially what we did is took uh advice and support from seven global uh advisers, global partners.

These are seven central banks around the world outside of the Asia region that made sure that we are not building something that is idiosyncratic to Asia but can actually reach the globe. It it's suitable for um global scalability and this set across the three um the three work streams at the bottom you could see technology and operations scheme and governance and the business and commercial adoption. Um these these work streams we we kind of kick them off in parallel. They're not sequential. But for example, when we look at scalability, we needed to make sure you know there are different sort of technology requirements, rules, etc.

in different countries. We need to make sure that these were taken into account. Uh same with the scheme and governance and we held sort of high standards in terms of the scheme rule book. Um and and obviously the business and commercial adoption, the the uh incentives and so on are different in different countries and so we had to to consider all of those things. So the global advisers if you're looking to build something that is um global in nature actually having advisers um there to to guide you was very very helpful for us.

So what I thought we'll do here is um I'll stop talking although you know what I'm going to show you is going to feature me as well but I'm going to show you this budget video um that um that you could hear from the central banks that were part of this project um and and hear what what they had to say. [music] Digital payments have become so easy that we hardly give it a thought. With a few taps of your thumb and [music] you're done, except when it comes to sending a payment to another country. Despite all of our advancements, the challenges and frustrations [music] remain. Now, a solution is near.

Instant [music] payment systems in different countries connecting once through a single hub. The solution is called Nexus, a project led out of [music] the Bank for International Settlements Innovation Hub in Singapore with our partners around the world. [music]

The success of Project Nexus is enabling a coalition of first moving countries to work towards connecting [music] their domestic fast payment systems. Nexus links your [music] bank account with an applicable ID such as a phone number, allowing you to send money across borders within seconds.

With Nexus, we can achieve instant crossber payments linkages at scale through a multilateral approach. Central banks have always played a role in payments as a public good. With Nexus, this role will be extended to crossborder payments, maximizing the network [music] effects.

It's a natural market for both uh payments and remittances. So, Thailand is in a good position to benefit from this and that's reflected in our strategy and our approach.

There is a compelling case to develop a multilateral payment network that will further improve on our existing bilateral payment linkages. One of the value propositions for us from Nexus is being able to link up very very easily and speedily with other economies as well.

According to a World Bank assessment, the average cost of remittances is about 6.2% or so. Even at 6.2%, I think there is considerable scope for reducing the cost and project Nexus is trying to achieve that.

[music]

This collaboration with partner countries will help deliver a platform that is scalable, lowcost and benchmarked against global standards. We expect crossber exchanges in commerce, tourism, employment and education to [music] grow. Instant payments connectivity like Nexus will support the growth of these exchanges.

Central banks such as ourselves need to play an important role. This includes setting the overall tone, fostering collaboration and streamlining the approach.

It is [music] a partnership of central banks with a shared vision of transforming crossber payments so that it's efficient and reliable.

This is a precursor to greater international cooperation among countries to achieve these twin objectives of making fast payments at a reduced cost. The VIS is proud to participate with our partners in [music] this project to advance our shared vision of a global multilateral network of connected fast payment systems.

Nexus has the potential to be a global service [music] creating benefits for economies and citizens around the world.

And that's our budget video. This is me and my team actually [laughter] having to be the actors. Um but but at least it uh

[applause]

We we won't be doing that for we won't be leaving our day jobs anytime soon. Um uh but um I mean you you heard from the the governors and I think that this was a it was important to get the support of the governors and and kind of here is where I wanted to talk a little bit about the lessons learned um and why was this a candidate for handover. There was some ingredients that we really um you know they presented themselves that made this uh a good candidate for handover where we looked at the clear use case you know we're building on the bilaterals they're popular uh and and more of them are happening and so a multilateral approach was a natural next step um the support from stakeholders so in the AAN region they also have this strategic sort of um you know e economic integration uh and and so this was part of that that work and that's why it was really sponsored from the top. It was toned from the top as one of the governors, Governor Rashid, you would have heard him say um and and so this was shared across all of the uh the the the partners and and um uh and and the various regions that worked with us. But there were also enabling factors the maturity of instant payment systems and you know how uh you know how entrenched they are and you know and and and how scaled they are on a domestic level and the ability to use that infrastructure.

Um and obviously the the bilaterals are are desired and we can um but but they can't be scaled. Uh but there's also been a lot of conversations around interlinking instant payment systems uh you know around the world. the CPMI has done some work on the you know the governance and um uh you know of interlinking instant payment systems and so there's been a lot of initiatives that have been talking about this and so it became quite a a natural thing for us to to to consider but other positive con contributors is the senior sponsorship I mentioned you know at the governor level but the steering committee which I chaired had deputy governors and assistant governors where we were able to make decisions we were able to or you know they were able to really think about not necessarily when you're making decisions on an operational level, they had an a strategic lens. And so that was really important for kind of being able to pro to progress the work very quickly. And obviously I mentioned the global input from our global partners to make sure that this was a a a global product at the end of the day.

But there are things that we had to improve along the way and things that we observed that were quite interesting which I thought will be helpful to to to share. One is that project management is very very important. Um and and you know at the start when I first joined and we had to really tweak the project management to get it right. We had to hire the right program manager and that made a difference to to be able to deliver on target sorry on on time and on budget. Um what we noticed is that even though the three work streams that I mentioned were done in parallel, everybody asked about technology first.

What does this technology do? Do do is it am I is it familiar to me? And in this case it was I uh uh APIs and ISO 2022 messages. So it was quite familiar but we really had to kind of answer some of these questions around technology first. Once um you know everybody was clear on the technology it was a case of okay well what rules apply to me if I were to join this this structure.

So you know the scheme rule book and the governance framework was very important that became a very you know topical conversation um that that we found uh we we had we engaged in and then once all of that was done and particularly when we got to the handover stage in phase four everybody started to ask about what are the incentives what does the business viability what does the business model look look like how can I take this information and take it to my investment board to be able to um to to be part of this project. So incentives were very important. Um the the incentives of all stakeholders were very important. Um but what I also wanted to say is is we weren't solving all problems of crossber payments with with this structure. You have to start somewhere and I keep saying if you want to do everything you you end up doing nothing.

So you have to start somewhere and then you start to look at how you solve some of the other problems. So the roles and incentives we have three key players in this ecosystem. I'm I'm not taking the consumer um obviously consumer is an obvious one but in terms of who will you know facilitate how this works you've got the payment service providers either on the sending um end or the receiving end you have the foreign exchange providers because obviously this is a crossber transaction and you have the settlement access providers and those are the liquidity providers for the um uh for the uh FX players. Now one institution can play all those three roles. It could play one role or or it could play um you know two roles.

Um and so the engagement with them is is really kind of delivering on that business case. Um looking at what potentially the fee structure would look like for Nexus so they understand you know what they pay, what are the incentives for them. Um how do we ensure that we benchmark it against some of the competitive solutions that are out there. Uh so for these these players it is a competitive structure. Um and and so the industry engagement was was really important.

So it was heavy industry engagement and the entity now, you know, it's set up with the they've hired a CEO and and and they they continue to do that. But what's next? I think this is a a slightly complicated chart, but I'll just really simplify it. So we're starting with this IPS linkage. So Nexus is now its own entity.

But if you think about uh interlinking instant payments on a crossber basis, two of the key frictions for crossber payments we always get told are compliance and uh foreign exchange clearing and settlement. And so two of our projects and this is where we can experiment with these ideas take sort of the specific sort of components and experiment with them. One particular project looks at automating foreign exchange clearing and settlement by um tokenizing FX and potentially settlement happening in tokenized central bank money. That's that middle layer and we call that project Rialto. And then the compliance piece is automating and streamlining compliance processes by prevalidating all the compliance requirements uh and um and kind of creating a verifiable proof that can be attached itself to the transaction.

And this is where project Mandela really addresses that point. And with project Mandela, we've moved from stage one to now moving into stage two. So without going into too much detail, this is where we, you know, you start somewhere and now this is going into implementation. But we're constantly thinking about what are the other components that we could potentially, you know, experiment with to reimagine um, you know, what the future financial market infrastructure should look like. And with all of this whether we're looking at um uh you know projects things that go into implementation I think the integrity of the financial system where is is really important and so a lot of our work around uh the innovation hub has really looked at uh this this uh point of integrity of the financial system.

Mandela explained is one of them which is around compliance but we also look at transaction monitoring with one of our projects out of the London center project hera um as well as collaborative analytics on a crossber basis and this is another one of our projects out of the Nordic center project Aurora um and we've also got projects around cyber security and so putting all of that together you could see how we're uh we're we're what we're putting together what we call a technology stack to combat financial crime or to you know enhance the integrity of the financial system. So these are again, you know, experimental ideas that we'd like to put out there for, you know, the the community to to consider and and and um and ask us questions. Um and so again with this idea of imagining the future, we can't kind of escape the fact that tokenization has been a topic of this uh uh conference yesterday and and today and we've been experimenting with tokenization uh a fair bit with its features of programmability, atomic settlements, composability. um the two projects that I mentioned just now, Rialto, the FX one and compliance one actually borrows from tokeniza from the D5 world um to and and so you could look at how some of the new technologies can really be used to either improve existing entrenched infrastructure that exists today like instant payment systems or it could potentially enable the new where you're looking at a a new um uh a new a new structure, a new infrastructure that that eventually over time could replace what what exists today and and these are these are choices that you know various jurisdictions will make for themselves but you know we're experimenting with with with those technologies across these different dimensions and so finally um you know when when we do all of this work what you know looking at some of our of our projects this this is sort of a summary of some of the considerations for the financial sector uh where you look at the role of the central bank as a lender of last resort you know the the safer settlement asset the private sector in terms of how they innovate and and and um all the the good entrepreneurial activity that they bring. um do you substitute or complement with these existing uh with with these sort of new new technologies as I mentioned and whenever we're you know we're looking at these you know interoperability is really at the heart and we take that by design we we try to build things that are modular that work with existing structures as well as new um and so this is really important as everybody is thinking about new technologies to think about the interoperability piece and that is the end of my presentation um happy to do whatever you need me to do

thank you so much. [applause] Um, I'm sure you had many many questions, but I think the time's up. So, I'm sure Maha will be available for any questions you may have after the session. Thank you.