Introduction to International Pix and Nexus

International Pix and Nexus are new cross-border payment initiatives launched by the Bank for International Settlements (BIS).

International Pix aims to enable instant payments globally between individuals and businesses. It will allow people and companies to send and receive money immediately between accounts held at financial institutions anywhere in the world.

Nexus is the platform that will enable International Pix. It is being developed by BIS to serve as a public utility for instant cross-border payments. Nexus will connect payment systems around the world and allow them to interface seamlessly.

By building this global clearing and settlement infrastructure, Nexus and International Pix seek to improve cross-border payments by making them faster, cheaper, more transparent, and more inclusive.

Purpose and Goals

International Pix and Nexus were created to improve cross-border payments between countries. Specifically, the goal is to make international payments faster, cheaper, more transparent, and more inclusive.

Some of the key problems Nexus aims to solve are:

• Slow processing times for international wire transfers, which can take days or weeks to settle. This introduces risk and uncertainty in transactions.

• High fees and opaque pricing for cross-border payments charged by correspondent banks and other intermediaries. This reduces access for individuals.

• Limited access to payment information. Sending and receiving parties often have little visibility into the status, fees, or timing of global payments.

• Many legacy payment systems are inflexible and do not interface in a standardized way. This makes connecting new systems and businesses difficult.

• Difficulty meeting regulatory requirements around identity, security, compliance, and data privacy when payments cross borders.

To address these challenges, International Pix will utilize the Nexus platform to provide a real-time gross settlement system. This will enable central banks to transfer funds directly between each other without intermediaries.

Nexus aims to increase speed, lower costs, enhance transparency, and broaden access for compliant payments between jurisdictions. This will benefit banks, payment providers, and end-users worldwide.

How International Pix Works

International Pix is a new cross-border payment system developed through the Nexus initiative led by the Bank for International Settlements (BIS). It aims to facilitate faster and cheaper payments between countries.

At its core, International Pix is built on distributed ledger technology (DLT), which allows transactions to be recorded and synchronized across multiple parties simultaneously. This removes the need for intermediaries and reconciliation between ledgers.

To make a payment through International Pix, the sender logs into their account at a participating bank or financial institution. They enter key details like the recipient's details and payment amount. The sender's bank will convert the local currency into the International Pix digital currency if needed.

The sender's bank then submits the transaction to the International Pix network. Validator nodes operated by participating central banks and commercial banks verify the transaction is formatted correctly and comes from an authorized institution.

Once validated, the transaction is added to the next block in the International Pix ledger. Nodes across the network update to reflect the new block and transaction data. This finalizes the transfer into the recipient's account, settling the payment in just seconds.

At the recipient's end, their bank will convert the digital currency as needed and credit their account in local currency. This entire process skips lengthy correspondent banking relationships and messaging interfaces used today.

The International Pix ledger uses cryptography and distributed consensus to ensure transactions are valid and irreversible. Its decentralized nature provides enhanced resiliency and no single point of failure.

Countries Participating

International Pix will initially launch in over 15 countries and jurisdictions across Asia, Africa, Europe, North America, South America and the Middle East. Some of the major countries confirmed to participate in the initial launch include:

• United States
• Canada
• Colombia
• United Kingdom
• European Union
• Japan
• Singapore
• Australia
• Brazil
• Nigeria
• Kenya
• South Africa
• United Arab Emirates

Additional countries are expected to join in phases after the initial launch. The goal is to have the majority of G20 countries on board within the first year.

International Pix has received broad support across developed and emerging economies. The collaboration between global central banks and monetary authorities has been key in enabling a unified cross-border payment system on this scale.

Bringing major economies together on a shared platform is a milestone for global commerce and finance. It has the potential to significantly improve access and lower costs for cross-border transactions across both consumer payments and business transactions.

Benefits for Cross-Border Payments

International Pix has the potential to significantly improve cross-border transactions in a number of ways:

• Faster settlement times

  • By connecting multiple countries' payment systems, International Pix allows for near real-time settlement of cross-border transactions. This is a major improvement over traditional correspondent banking, which can take 3-5 days for funds to be received.

• Lower transaction costs

  • International Pix aims to reduce fees for cross-border payments by increasing competition and transparency between providers. Lower costs will make it more affordable for consumers and businesses to send money abroad.

• Enhanced access

  • Individuals and businesses in participating countries will have expanded access to cross-border payment services through regulated financial institutions. This can help expand financial inclusion.

• More payment information

  • International Pix requires transactions to include improved payment information such as account numbers, purpose of transfers, and sender/receiver data. This enhances compliance and security.

• Interoperability

  • International Pix will connect multiple localized payment systems. This interoperability provides optionality for senders and receivers when making cross-border transfers.

• Common rules and standards

  • Participating countries agree to common rules, standards, and compliance practices. This consistency improves transparency and helps prevent transaction errors.

Overall, International Pix has the potential to drive significant improvements in cost, speed, access, and transparency for cross-border payments. This could benefit consumers, businesses, and economies that rely heavily on remittances and trade/investment flows. However, realizing these benefits will depend on widespread country adoption and integration with domestic payment systems.

Being connected directly to the Pix makes Trio's Payments Institution a channel for reaching these transactions within one integration.

Impact on Remittances

International Pix could have a significant impact on reducing the costs of sending remittances across borders. Remittances refer to money transferred by foreign workers to their home countries.

Globally, over $500 billion is sent annually in remittances. However, the average transaction fee is over 6%, which can represent a significant portion of funds for low-income migrant workers.

By utilizing blockchain and digital currencies, International Pix aims to provide a faster and cheaper way to send remittances. Transactions would settle in seconds rather than days as with traditional wire transfers. Fees could potentially be a fraction of current costs.

This would allow migrant workers to retain more of their earnings to support families back home. More money could go directly toward critical needs like food, education, housing, and healthcare.

Countries that rely heavily on remittances like Mexico, India, China, and the Philippines could see increased capital inflows. This may spur economic growth and entrepreneurship as more funds circulate locally.

If successful, International Pix could transform remittances into an efficient, equitable system empowering migrants and their communities. Remittances don't just support families - they can drive development, reduce poverty, and expand financial inclusion.

Integration with Local Payment Systems

One of the key goals of International Pix is to integrate with domestic payment systems and banking infrastructure. This is essential for enabling fast and frictionless cross-border payments.

International Pix will connect to local payment rails like Fedwire in the US, Faster Payments in the UK, and equivalents in other participating countries. This ties into the existing bank account and payments application infrastructure that people already use on a daily basis.

For recipients, receiving a cross-border payment via International Pix should feel the same as getting a domestic funds transfer. The money will instantly appear in their bank account, with no extra steps required.

The integration works both ways too. Users can trigger outbound International Pix payments from their existing mobile or online banking apps. There's no need to sign up for a separate service.

Under the hood, the Interledger Protocol (ILP) will serve as a common language to bridge different payment networks. ILP provides a standard clearing and settlement layer between national payment systems.

The end goal is a payment experience as smooth and easy to use as domestic payments. International Pix aims to make cross-border transfers an invisible aspect for end users. The only noticeable difference will be the speed, cost savings, and convenience compared to legacy correspondence banking.

Data Privacy and Security

The privacy and security of user data is a critical concern for International Pix and the Nexus initiative.

• At the core of the platform is a decentralized ledger technology that allows transactions to occur securely without transmitting personal data to centralized entities. This helps mitigate the risks of large-scale data breaches that have affected even major financial institutions.

• Transactions on International Pix rely on public key cryptography, ensuring payer and payee identities remain anonymous while still validating transactions. No personal data like names, account numbers, or addresses are shared through the platform.

• The decentralized and encrypted nature of Nexus means there is no central point of attack or failure. Even if one node were compromised, the overall network remains secure and functional.

• While transaction details are recorded on Nexus for validation purposes, the data is pseudonymized so it cannot be traced back to real-world identities. Appropriate access controls further limit data exposure.

• Participating banks and financial institutions must comply with local regulations and international standards around data privacy protections in order to join the network. Audits help confirm their security and privacy controls are up to par.

• Users retain control over their own encrypted wallets and private keys. Without access to a user's private key, their identity and account details remain secure. Users can also independently audit wallet transactions through the public ledger.

• Biometric authentication like fingerprint or facial recognition helps secure access to International Pix accounts and wallets on users' local devices. No biometric data is stored or shared through the network.

In summary, International Pix and Nexus employ the latest encryption, decentralization, and privacy-enhancing technologies to keep user data safe, secure, and private while still facilitating efficient cross border payments globally.

Timeline and Roadmap

The launch of International Pix is expected to take place in phases over the next 6-12 months, so we will propably see it still in 2024.

With more countries and currencies connected, the system will focus on increasing adoption by banking and financial institutions. The long-term goal is to make International Pix a ubiquitous global standard for cross-border payments and remittances.

The future roadmap involves steadily expanding reach, improving speed, reducing costs, and enhancing services. Some key initiatives on the roadmap include:

• Support for additional payment types like recurring payments and micropayments.

• Integration with a wider array of national payment systems and financial infrastructure.

• Developing new features like request-to-pay, proxies, and multi-party transactions.

• Leveraging blockchain, central bank digital currencies, and smart contracts to enable programmable money.

• Meeting regulatory compliance across jurisdictions.

• Building open APIs and developer tools to spur innovation.

As International Pix scales globally, it aims to create a more connected, inclusive, and frictionless worldwide payments ecosystem.

Conclusion and Impacts

International Pix and the Nexus initiative have the potential to significantly impact global finance and cross-border payments if successfully implemented in the coming months. Key points and takeaways include:

• International Pix aims to enable real-time cross-border payments by connecting multiple countries' payment systems through a common platform called Nexus. This global network could allow individuals and businesses to send and receive funds instantly across borders.

• By moving away from correspondent banking, International Pix and Nexus hope to reduce payment processing costs and increase speed and transparency in cross-border transactions. This could benefit both large financial institutions as well as individuals sending remittances.

• Dozens of central banks, payment service providers, and technology companies are collaborating on this initiative under the guidance of the Bank for International Settlements. However, seamless integration between diverse financial systems poses challenges.

• If achieved, International Pix would modernize and transform cross-border payments, impacting remittances, global commerce, and economic growth. Payments would be faster, cheaper, more accessible and inclusive.

• However, risks around implementation delays, privacy breaches, and unintended impacts remain. Extensive testing and coordination is still required in the coming months before launch.

• Overall, International Pix represents an ambitious vision for the future of payments and global financial infrastructure. While promising, its success is not guaranteed. But if realized, it could usher in the next generation of financial services worldwide.

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