Obligations & compliance
Each PSP must comply with all applicable regulation and compliance obligations. In particular, PSPs must ensure that all payments sent through Nexus are screened against relevant sanctions lists.
A full list of obligations are defined in the Nexus Scheme Rulebook.
The Nexus Scheme Rulebook sets some basic requirements to ensure transparency for customers sending Nexus payments:
- The Sender is responsible for any fees charged by the Source PSP
- The Recipient is responsible for any transaction fees charged by the Destination PSP.
- The Source PSP and Destination PSP can decide the level of fees it wishes to charge.
- Any fees charged to Sender or Recipient must be billed separately. Deductions from the amount transferred are not permitted.
- The Source PSP may choose to add a markup on the FX rate that they pay. They do not need to disclose this markup to the Sender.
- Before the Sender approves the payment, they must be shown:
- The exact amount (in the Source Currency) that will be deducted from their account
- The exact amount (in the Destination Currency) that will be credited to the Recipient’s account
- The effective exchange rate (between the amount deducted from the Sender’s account and the amount credited to the Recipient’s account) must be shown to the Sender before they confirm the payment
- Any transaction fees that the Source PSP will charge the Sender
This framework ensures that:
- The Sender has transparency and certainty over what they will be charged and how much the Recipient will receive.
- The Source PSP has enough flexibility to find a commercially attractive pricing model, whether through marking up the FX rate or charging transaction fees.
Compared to traditional cross-border payments where the total fees and applicable FX rate may be unknown until the payment is completed, this offers much greater transparency and should also encourage competition between PSPs.
One limitation is that Nexus is not able to inform the Sender of the fees that the Destination PSP will charge the Recipient. This is because:
- The Sender already has certainty over what will be credited to the Recipient’s account, as no deductions from the amount transferred are permitted. Therefore the Sender has certainty that – for example – they have paid the full amount of an invoice to the Recipient’s account. This means that any obligation between the Sender and Recipient has been settled.
- Most PSPs do not charge fees for receiving payments, instead preferring to charge Senders. However, some PSPs who mainly receive payments (eg in countries that receive strong remittance flows) may not send many payments and may need to charge fees to Recipients to make the service commercially viable. Therefore it is not feasible to set a Nexus-wide fee model for receiving Nexus payments.
- It is technically difficult to ask each PSP what they will charge for a specific payment, since that charge may depend on the account type (unknown to Nexus), the customer type and even the volume of transactions in a month.
- Even if the Recipient’s fees are known to the Sender, this is not actionable information for the Sender. For example, if the Sender believes the Recipient is paying more than necessary for receiving a payment, it is unrealistic for the Sender to ask the Recipient to open an account with a more competitive PSP before making the payment. In addition, the Recipient has already signalled their willingness to pay those fees by providing those account details to the Sender.
The obligations of PSPs when using a proxy lookup service are defined in the Nexus Rulebook. In particular:
The PSP is obliged to only perform lookups for the intention of initiating a payment. However, there is no obligation to complete a payment after initiating a proxy lookup (for example if the Sender decides not to proceed with the payment).
When data is returned in response to a proxy lookup request, the PSP must use that data only for the purpose of processing this transaction, and not for any other purpose. (The PSP must not, for example, add the phone number that was used as an alias and the account name returned by the proxy service to their marketing database.)
The PSP must display the name (or nickname, depending on the scheme) of the account holder, as provided by the Proxy Lookup Service, to the Sender before they confirm the payment. This provides the Sender with greater confidence that they are sending funds to the correct account and reduces the change of the proxy being used for fraud.
The PSP must monitor the number of proxy lookup requests a specific Sender makes to ensure that they are not ‘phishing’ for account details. At a basic level, this may involve imposing a timeout for the user if they look up say, 5 different proxies in a short period without initiating a payment (ie a rate limit on lookup requests).