Role of the SAP

Settlement Account Providers (SAPs) enable FX Providers who are not members of a particular instant payment system (IPS) to participate in Nexus.

SAPs provide accounts to FX Providers (FPXs) who are not members of a particular Instant Payment System (IPS). This allows FXPs to provide FX to a wider range of corridors, without needing to become full members of each domestic IPS (which can be prohibitively costly). By providing this service, Settlement Account Providers play a crucial role in enabling efficient and competitive FX provision in the Nexus network.

Any PSP (ie member of an IPS) can act as an SAP if they choose, subject to the conditions and obligations outlined in this section.

Before reading this guide, please review the overview of the FX provision model in Nexus.

The SAP is only engaged at the point that a Source PSP has selected an FX Provider’s quote and submitted a payment instruction to the Source IPS referencing that quote. The payment instruction will reference the accounts that the FXP holds with SAPs.

NB: Where an FXP is a member of the IPS, they do not need to use a separate SAP. Instead, they effectively act as SAP to themselves (for that specific IPS). In this case, the FXP must also comply with the obligations that apply to SAPs and should also read this guide. The rest of this guide assumes that the FXP is not a member of the IPS and therefore uses a SAP in each IPS.

The Settlement Account Provider model

• An SAP must be a member of at least 1 domestic IPS so that they are able to send and receive payments. Therefore, an entity must be a PSP (as defined in Nexus) in order to become an SAP. (All SAPs are PSPs by definition, but not all PSPs will choose to act as SAPs.)

• The Settlement Account Provider only deals in its own “domestic” currency. It does not swap one currency for another and therefore is not an FX Provider (although it does provide services to the FX Provider).

• Nexus does not select or appoint SAPs. An SAP must be chosen by an FXP.

• The terms between the SAP and FXP are agreed bilaterally, outside of the Nexus scheme.

• An FXP will select only one SAP per IPS. However, as multiple FXPs can provide FX to a specific currency pair, there may be multiple SAPs for a specific IPS.

• One SAP can provide services to multiple FXPs.

• An FXP can use different SAPs in different IPSs. (The Source SAP and Destination SAP do not need to be the same company, and do not need to have any relationship with each other or communicate with each during payment processing.)

Role of SAPs in a specific Nexus payment

Nexus processes payments from the Source PSP to the Destination PSP via two Instant Payment Systems (IPSs). The Nexus payment is settled in each IPS between the respective PSP and the SAP.

For a specific payment, a SAP will play one of two roles:

• The Source Settlement Account Provider (S-SAP) is a member of the Source IPS. It provides an account to the FXP, denominated in the Source currency.

  • The Source PSP sends funds (in the Source Currency) to the FX Provider’s account at the S-SAP.

  • This payment is processed through the Source IPS, who debits the Source PSP and credits the Source SAP.

  • The Source SAP will in turn credit the FXP’s account.

• The Destination Settlement Account Provider (D-SAP) is a member of the Destination IPS. It provides an account to the FXP denominated in the Destination currency.

  • The D-SAP will debit the FXP’s account at the D-SAP

  • The D-SAP will then send funds (in the Destination Currency) to the Destination PSP’s account

  • This payment is processed through the Destination IPS, who debits the D-SAP and credits the D-PSP

A more detailed explanation of this process is given in Flow of funds through Nexus.