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The European Payments Council (EPC) has published the first One-Leg Out Instant Credit Transfer (OCT Inst) scheme rulebook, which governs how the euro leg of cross-border instant payments should work.
A one-leg out transaction involves a payment to or from a payment service provider (PSP) that is located in the Single Euro Payments Area (SEPA) and another one that is outside SEPA. SEPA covers the whole of the EU, as well as some other European countries including the UK, Norway and Switzerland.
One-leg out transactions are generally not covered by the EPC’s SEPA Credit Transfer (SCT) rulebook, but given ongoing market and regulatory initiatives to enhance cross-border payments, the EPC decided to create a common set of rules and standards for one-leg out transactions.
Among these global initiatives is the linkage between the pan-European EBA Clearing and the US-based The Clearing House (TCH), which are working with SWIFT to enable faster account-to-account payments across the Atlantic.
In addition, the G20’s roadmap on cross-border payments has set a 2027 target for 75 percent of cross-border retail payments arriving to the recipient within one hour of initiating the payment.
The new rulebook is intended to increase the interoperability for the operation of the euro leg of an international instant credit transfer.
According to the EPC, this enables PSPs to offer their customers a faster execution of such transactions, more upfront transparency on costs and parties involved, and better payment status traceability.
The rulebook supports transactions when a financial institution located outside SEPA sends or receives money to or from a SEPA country, even if it is an end-to-end euro transfer, as well as situations when a SEPA-based institution sends an instant transfer to another SEPA-based institution but the transfer involves a euro exchange.
OCT Inst is built on the existing SCT Inst scheme which, according to the EPC’s Q&A paper, gives existing scheme members “an ideal stepping stone” to implement the new scheme.
The EPC also says that euro-leg entry PSPs and exit PSPs may be able to develop new business models by offering OCT Inst transaction services for both euro-leg-based PSPs and non-euro-leg financial institutions.
As the scheme does not dictate service fees, PSPs can set their own pricing policy, which the EPC says may make it more attractive for PSP customers to make OCT Inst transactions.
The OCT Inst scheme is optional, although there is a participation fee to recover the costs of managing the scheme.
The first version of the rulebook takes effect on November 28, 2023 and will remain so for two years.
