Role of the FX Provider
Every cross-border, cross-currency payment requires an actor who is willing and able to swap one currency for another. In Nexus, the entity providing this service plays the role of FX Provider.
This is one of the three key roles that a financial institution may play in Nexus:
Payment Service Provider (PSP), sending and receiving payments on behalf of customers
FX Provider (FXP), providing FX rates and FX conversion to PSPs
Settlement Access Provider (SAP), who provide FXPs (or PSPs) who are not themselves members of an IPS with accounts which can send and receive payments through a specific Instant Payment System (IPS)
The key roles in Nexus are described in more detail in Chapter 2.3 of the Nexus (2024) report.
When FX is provided by the Source PSP
In some cases, the Source PSP will act as FXP for its own payments; this may happen when:
the Source PSP is a participant in the IPS of the Destination Country, OR
the Source PSP holds an account at a PSP in the destination country, and that PSP is willing to act as a Settlement Access Provider.
When FX is provided by a third-party FX Provider
In other cases, the Source PSP will make use of a third-party FXP; this is more common when the Source PSP only operates in one country and does not hold funds in the destination country.
Third-party FXPs would be regulated financial institutions that are willing to accept the Source Currency from the Sender and pay out the Destination Currency to the Recipient.
Third-party FXPs inform Nexus of the current rates at which they are willing to exchange one currency for another. They compete to offer the best rates for a specific corridor, helping to ensure a competitive market.
Each payments corridor between two Nexus countries and currencies will have one or more third-party FX Providers, who are in competition with each other to provide the best rates.
Any FX Provider that meets the eligibility requirements and adheres to the Nexus Scheme may provide FX conversion to Nexus payments.
Playing multiple roles in Nexus
A single financial institution may choose to play one or more roles in Nexus (subject to eligibility). The role an institution plays may vary depending on the currency pair and specific payment.
The table below shows the exhaustive combination of roles that an FXP may play. When the Source PSP and the FX Provider are separate entities, the Source PSP is using a Third-Party FX Provider.
(Each box shows a distinct financial institution.)
Two special cases have a significant impact on the way that the FXP acts:
SPECIAL CASE 1: Source PSP acts as FXP for its own payments (scenarios 10, 11 and 12 in the diagram below):
A PSP that holds the Destination Currency in an account at a Destination SAP may act as FX Provider for their own payments.
In this case the Source PSP does not need to request a quote from Nexus. They may instead define the FX rate they wish to apply to the payment. The Source PSP must follow a special process when preparing the payment instruction – see Payment setup for PSPs who provide their own FX.
SPECIAL CASE 2: An FXP and (one or both) SAP(s) are the same entity (scenarios 5-12 below):
An FXP that is a member of either the Source or Destination IPS may also act as Settlement Access Provider to themselves. (See Accessing Instant Payment Systems)
In this case, everything in this guide applies as normal, but in addition, the obligations that apply to an SAP also apply to the FXP, in their capacity as an SAP. (See Settlement Access Provision.)
Accessibility for smaller or non-bank FXPs
Nexus is designed to enable a wide range of actors to play the role of FX Provider. For example, the use of Settlement Access Providers enables institutions who are not members of an IPS to access that IPS and provide FX via Nexus. This ensures that FX provision is not limited to the largest international banks (who are more likely to be members of multiple IPSs). It also makes it more likely that there is FX provision for lesser-used or “exotic” currency pairs.
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