One-Leg Out Instant Credit Transfer rulebook – the starting signal for cross-border instant payments

Real-time payments are already widely used in many parts of the world. In the SEPA area, instant payments have been available since 2017. A legislative initiative of the European Commission now also envisages making it obligatory first to receive real-time payments and then, a few months later, to send them. Real-time payments systems are also already in use in other regions. Brazil, India and Singapore, for example, have systems with high transaction numbers. However, there is still no possibility to transfer money across borders in real time. Cross-border transfers are often still associated with long execution times and non-transparent fees. That can change now.

Instant payments goes international
In the area of cross-border instant payments there are already many initiatives that want to enable international real-time payments. Examples are immediate cross-border payments (IXB), Nexus and SWIFT Go. The developments in the area are not by chance; international politics is also pushing for efficient and cost-effective cross-border payments. The G20 countries have set themselves the goal of making cross-border payments cheaper, faster and more transparent and have developed a roadmap for this. The European Commission is pursuing the strategic goal of strengthening the role of the euro in the international context – an important component here is also real-time payments.
The European Payments Council (EPC), as the interest group of European payment service providers, is also involved in the international discussions. The EPC manages the SEPA schemes and thus, since its introduction in 2017, also the SCT Inst scheme. With the One-Leg Out Instant Credit Transfer (OCT Inst) rulebook the EPC now goes one step further.

The One-Leg Out Instant Credit Transfer rulebook
In November 2023 the new OCT Inst rulebook will come into force. It provides rules and formats for real-time cross-border payments in euro – but concrete technologies for implementation still need to be developed. There is still no obligation for payment service providers to subscribe to the OCT Inst rulebook and offer this form of international real-time payments. The rulebook covers the following scenarios:

  • International instant payments: instant payments where one participating PSP is located in the SEPA area and one in the non-SEPA area and where at least the SEPA part of the transaction is denominated in euro. This includes, for example, euro payments to the USA.
  • Cross-currency instant payments within the SEPA area: instant payments within the SEPA area between euro and non-euro currencies (e.g. GBP, CHF).

To avoid confusion: For instant payments within the SEPA area in euro, the familiar SCT Inst scheme continues to apply; the OCT Inst rulebook does not apply here. The following table illustrates the scope of OCT Inst in contrast to SCT Inst and other schemes:

For participation in the OCT Inst scheme the rulebook provides for different roles. Financial service providers who decide to participate can individually decide which offer they want to provide on the basis of OCT Inst and then take on the corresponding roles. A financial service provider must at minimum take on the role of a SEPA-based payee's PSP. This means that the provider must be able to process incoming OCT Inst. In addition, a financial institution may decide to offer OCT Inst to its own outgoing customers. For this, it must also become a SEPA-based payer's PSP. Euro Leg Entry PSPs and Euro Leg Exit PSPs act as a link between the SEPA Euro Leg and other legs of the transaction. In addition, as an OCT Inst processor you can provide other services. The following overview illustrates the interaction of the different roles:

The advantages of OCT Inst as a procedure for international payments are obvious. End customers can benefit from more efficient payments procedures with higher STP rates. Financial institutions can win back business lost to other providers in cross-border payments or also open up new business models and associated revenue opportunities. Moreover, an OCT Inst payments procedure does not have to be implemented completely from scratch from the ground up – the format is based on the SCT Inst rulebook and is internationally compatible as it is based on CBPR+ and IP+.

The race is on – what should financial service providers do now?
Currently, there is still uncertainty about the implementation, although the possible launch date is only a few months away.  Moreover, the rulebook only regulates the SEPA side of the transaction. For the non-Euro Leg, corresponding specifications are required, which are outside the scope of the EPC.
The coupling of real-time payments systems is a promising approach to enable international instant payments. OCT Inst forms the basis for international real-time payments on the SEPA side.
Due to the lack of clarity and the voluntary nature of the scheme, most financial service providers are still taking a wait-and-see approach. However, every financial institution should address the strategic implications at an early stage and conduct an impact assessment.
  • What is my business model in international payments?
  • What offers do I have and what revenues are associated with them?
  • Which areas could be replaced by OCT Inst?
  • What services can I offer to open up new business areas?

In the future, cross-border instant payments will also become the standard in cross-border payments. It is still open who will benefit and who will be burdened by this. Financial service providers should set the strategic course to be on the right side. The race is on!

Author: Ann Kristin Mundt, Lukas Schlotfeldt


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