The Bank for International Settlements (BIS) released a proposal this week that aims to break down obstacles to international payments presented by technology differences.

Until now, instant transactions made from a sender in one country to a recipient in another have been plagued by tech challenges. While Instant Payment Systems (IPS) like Zelle and Venmo are currently operational within nearly 60 countries — with more in development — bridging technology across borders would allow payments to transfer in just 60 seconds.

BIS’ proposed cross-border payment blueprint, called “Project Nexus,” would link already available IPS options in order to streamline cross-border payments in near-real time.

Currently, cross-border payments are slow, labor-intensive and expensive. IPS, on the other hand, allow “domestic payments between bank accounts [to] happen in seconds, at near-zero cost,” according to the proposal by the $462.1 billion BIS.

Project Nexus is the result of a collaboration between the BIS’ Innovation Hub Singapore Centre and the Monetary Authority of Singapore, developed between multiple central banks and financial institutions around the globe. It draws on a linkage between Singapore’s PayNow and Thailand’s PromptPay, which launched in April, as well as the National Payments Corporation of India’s Unified Payments Interface system.

Linking two countries is a relatively simple integration problem and makes sense when “two countries have a close relationship and a significant flow of payments,” the report states.

But problems arise as the connections scale, the BIS acknowledged, pointing out these independent payment systems often differ in multiple ways, such as:

• Data formats, standards and mandatory fields;
• Processes and the sequence of steps in a payment process;
• Scheme rules around liability, disputes, data protection and privacy etc; and
• Functionality, such as whether aliases are used and whether there is a confirmation of payee service.

“Three countries require just three country-to-country links, but a network of 20 countries would require 190 country-to-country links,” the report stated. “Each IPS operator would need to maintain custom-built links with 19 other IPSs, each with their own standards and processes. This is difficult from a software development and IT operations perspective.”

To solve that problem, Project Nexus calls for an approach that somewhat mimics the internet. It requires the adoption of the “Nexus Scheme,” which defines the rules and obligations for IPSs, banks and payment services providers that make cross-border payments through Nexus. This would act as a supplement to an IPS’ current scheme for domestic payments. The creation of a “Nexus Gateway,” or software component, is also required in order to coordinate processes such as compliance, foreign exchange (FX) conversion, message translation and the sequencing of payments between two countries.

The Nexus Scheme is a set of standard protocols that puts all parties on the same page, with the Gateway acting as a sort of router for payments between countries. Banks and liquidity providers would connect to the Gateway as well, with sender banks and recipient banks holding accounts with IPS members.

Banks also play a role as FX providers. Each Nexus payment requires an FX provider, or regulated financial institution, that is willing to accept the source currency and pay out the destination currency, the report notes. These institutions will “inform Nexus of quotes for the rate at which they are willing to swap one currency for another. They compete to offer the best rates to ensure a dynamic market,” the report notes.