Revenue model for FXPs

This page relates only to third-party FX Providers.

For Source PSPs that provide their own FX, a different process applies. See Payment setup for PSPs who provide their own FX for details.

Revenue model for FXPs

As described in the Nexus Scheme Rulebook, FXPs are not permitted to:

• make a deduction from the value of a Nexus payment as it flows through the FXP's accounts, or

• charge a separate fee (“Invoiced Fee”) to PSPs for the FX service they provide.

Therefore FXPs must set the exchange rates they offer via Nexus at a level that provides for all their own costs plus their expected profit margin.

Costs incurred by FXPs

Key costs incurred by FX Providers will include:

• The initial technical cost incurred by the FXP to integrate with Nexus

• The costs of acquiring a particular currency (either purchased via wholesale FX markets, or borrowed, for example if the SAP provides the FXP with a line of credit)

• The costs charged by Settlement Access Providers for account provision (if the FPX is not a member of the IPS in question)

• All other costs of operation, onboarding PSPs, regulatory compliance etc.

Ensuring a competitive FX market

Nexus is designed to ensure a competitive FX market:

• FX Providers are in competition with each other to provide the best exchange rates for a given currency pair.

• PSPs have free choice over which FXP they use (subject to the requirement that the PSP has completed the initial KYC and onboarding process with that FXP - see Onboarding PSPs)
• When an FXP posts a quote to Nexus, they are informed of the current leading market rate for that corridor (but not the FXP offering that rate), so they can assess whether the rates they offer are competitive against the market as a whole.

To have competitive pricing, there needs to be more than one FX Provider for a specific corridor. Without this, the sole FX Provider will have a monopoly on that corridor. Rates in a monopoly corridor will be less competitive, although users could switch to using other payment methods, so there is still some pressure on the FXP to offer rates broadly in line with the wider FX market.

The API credentials given to third-party FXPs will not allow them to use the GET /quotes/ API and so they are unable to see the full breakdown of rates offered by their competitor FXPs.

FXPs who are also PSPs will have two separate sets of API credentials and must not share the information from the GET /quotes/ response between the payments and FX/Treasury departments.