Money would soon jump borders in 60 seconds or less.
When I described Nexus as consumer banking’s next big thing three years ago, it was just a concept: a blueprint for countries to link their smartphone-based payment networks. The idea is now much closer to reality. The central banks of India, Malaysia, the Philippines, Singapore and Thailand are working with the Bank for International Settlements on live implementation. Bank Indonesia is participating as an observer.
The goal is to start weaving a World Wide Web of retail payments. The Internet is the same everywhere, and anyone can be on it by following the standards laid down by its governing institutions. This would be similar. Nexus would not be a separate download on your phone. A not-for-profit body would oversee a common architecture that any country’s banks and e-wallet providers can adopt to make their apps go global.
It would be a behind-the-scene operation that would streamline the bewildering differences that currently exist. Take something as simple as identifying the correct bank account. Europe uses international bank account numbers while US banks have routing numbers and Society for Worldwide Interbank Financial Telecommunications codes. There is no defined international length for account numbers. Get one digit wrong, and your transfer could be stuck for weeks.
In domestic transactions, it is increasingly possible to use a convenient proxy like a mobile-phone number or a virtual ID. Nexus would make sure that this proxy becomes globally available. Want to split a dinner bill with colleagues from around the world? Just go to the app you normally use, select your coworkers’ country and type in their mobile number. You would see a partially masked name. If it is the right payee, hit the send button. They would receive the funds in less than a minute — in their currency.
Foreign workers making remittances to family might find it a cheaper option than bank transfers. Foreign-exchange providers would compete and Nexus would show customers the best currency conversion rate. Tourists would be able to spend out of their home-country bank accounts at shops abroad that are too small to accept credit cards. Even governments might use the protocol to send pensions to their citizens living overseas.
Smartphones are now ubiquitous. Countries where small-ticket retail IOUs used to be settled almost entirely in cash are now fully accustomed to scanning quick response, or QR, codes at shops and making person-to-person payments to mobile numbers and virtual IDs. India’s eight-year-old Unified Payments Interface, or UPI, logged more than 100 billion transactions last year. Brazil’s PIX ranks alongside UPI as among the fastest-growing account-to-account systems worldwide.
Debiting the buyer’s bank balance — and crediting the seller’s — has not made much headway in North America, where plastic still prevails. However, account-to-account is already the leading method for settling e-commerce transactions in Thailand and Malaysia, where the networks are known as PromptPay and DuitNow respectively. BI-FAST, which went live during the COVID-19 pandemic, accounted for 28 percent of Indonesia’s e-commerce last year, according to Fidelity National Information Services Inc’s latest Worldpay report. Blik, the Polish equivalent owned by banks and Mastercard Inc, has a 7 percent share of the country’s online sales.
Asia is the right launching pad for Nexus, because many of the region’s phone-based payment networks already work in more than one country. As of May, Southeast Asia has 13 person-to-merchant bilateral connections — such as between Malaysia and Thailand, Indonesia and Thailand, and Malaysia and Indonesia. Person-to-person transfer protocols in Singapore and India are linked.
With Nexus, there would be no need to individually hook up each country with all others. Once a central bank has decided to join and adopted the rules around sending and receiving messages, any instant-payment operator can get on the common software interface to exchange instructions with a foreign counterpart and move money.
Nexus would not be the last word in how value is exchanged across national boundaries. A more powerful proposal is the “Finternet,” a blockchain-based unified ledger. A giant scorecard that can be tracked in real time by customers would be more efficient than the current system where messages must flow between trusted intermediaries, instructing them to update their individual accounts.
However, for the Finternet to work, central banks would have to supply digital cash. A token-based system would also require fraud mitigation via a “trusted user identity.” All that is well in the future. Nexus, on the other hand, would be here soon — once central banks are assured that the protocol would be robust enough to tackle money-laundering and terrorism financing. Countries with less than fully convertible currencies — such as India — would need to ensure that quick payments for goods and services purchased overseas do not become a conduit for short-circuiting capital controls.
It is worth putting in the additional work. In the 21st century, it makes no sense to shell out more than US$12 for moving US$200 across borders. Nexus can slash the charges by half. Even if it is ultimately supplanted by superior technology, it would still be a welcome innovation — just like Netscape, which brought the first wave of Internet users online before being dethroned by better browsers. For now, it would be to great to see your money gone — as long as it reappears with the right person in 60 seconds.
Andy Mukherjee is a Bloomberg Opinion columnist covering industrial companies and financial services in Asia. Previously, he worked for Reuters, the Straits Times and Bloomberg News. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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