On 28 March 2023, the European Payment Council (EPC) published the first version of its One-Leg Out (OLO) Instant Credit Transfer (OCT Inst) scheme rulebook. This new scheme allows payment service providers (PSPs) to handle the Euro Leg of an international cross-border and/or cross currency (instant) credit transfer, maximising the synergies with existing Single Euro Payments Area (SEPA) payment ‘rails’. These SEPA ‘rails’ include procedures, features and standards, which are reflected in arrangements the SEPA PSPs are already familiar with (such as the SEPA Instant Credit Transfer (SCT Inst) scheme and the existing SEPA payment infrastructures).

Through the OCT Inst scheme, the PSPs in SEPA can process incoming and outgoing OLO credit transfers instantly through highly automated and instant funds transfer systems available in the Euro Leg and via similar systems in the respective non-Euro Leg countries or jurisdictions.

The OCT Inst scheme gives PSPs the opportunity to offer their customers a faster execution of such international payment transactions, more up-front transparency on costs and parties involved, and better payment status traceability.

What is a One-Leg Out transaction?

It is a transaction whereby only one of the PSPs - either the Payer’s or the Payee’s - is located in the SEPA schemes’ geographical scope. The OCT Inst scheme clearly supports such specific payment transactions.

In addition to that, the OCT Inst scheme also supports cross-currency payments between euro and other non-euro SEPA currencies (i.e. Nordic currencies, CHF, GBP, Central and Eastern European currencies) within the SEPA schemes’ geographical scope.

The genesis of the OCT Inst scheme

It all started in 2018 with a change request—which was not retained for the 2019 SEPA Credit Transfer (SCT) scheme rulebook—to include incoming euro OLO credit transfers under the SCT scheme rulebook. In the following years, the EPC regularly received questions from scheme participants on whether such transactions are within the scope of the SCT scheme (which they are not).

Meanwhile, continuous enhancements to payment market infrastructures and national payment schemes across the globe have given opportunities for PSPs to improve their international payment service offerings in terms of speed, transaction tracking, payment finality and costs.

As for the regulatory side, the European Commission (EC) issued already in 2018 a communication on strengthening the international role of the euro and subsequently, in 2020, its Retail Payments Strategy outlining among others a pillar on efficient international payments. Furthermore, the Financial Stability Board - an international body monitoring and making recommendations about the global financial system - published several targets for enhancing cross-border payments and regularly reports on progress in implementing the G20 Roadmap for Enhancing Cross-Border Payments.

In this context, the EPC Board decided to launch an ad-hoc One-Leg Out Task Force to provide the EPC Board with a report on the business aspects, consequences of and scenarios for allowing euro OLO credit transfers. Based on that report, the Board agreed with the development of an [Instant] Euro One-Leg Out Credit Transfer arrangement.

Eventually, this proposed arrangement has evolved into version 1.0 of the OCT Inst scheme rulebook.

About the rulebook

Following a three-month public consultation on a draft [Instant] Euro One-Leg Out Credit Transfer arrangement which led to various comments from stakeholders of the entire payment value chain, the EPC published the first version of the OCT Inst scheme rulebook on 28 March 2023.

Version 1.0 of the 2023 OCT Inst scheme rulebook focuses exclusively on the Euro Leg of international instant credit transfer-based payment transactions.

Difference between the OCT Inst scheme and the other EPC payment schemes

The OCT Inst scheme is unique as it is defined as a cross-currency payment scheme. Under the SCT and SCT Inst schemes, the currency of the transaction itself is in euro end-to-end although a currency conversion may happen at the Originator PSP and/or at the Beneficiary PSP, and the originator and beneficiary payment accounts may be debited and/or credited in another currency.

Under the OCT Inst scheme, one leg of the international transaction concerned is in euro whereas the other leg is in another currency. This means that the currency conversion may happen at any point in time in the payment chain.

Please note however that under the OCT Inst scheme, the transaction itself can also be in euro end-to-end but only when the sending financial institution or the receiving financial institution of that transaction is based outside SEPA.

Participants adhering to the OCT Inst scheme will as a minimum support the scheme as a Euro Leg-Based Payee’s PSP. They can also indicate whether they also support the scheme as a Euro Leg-Based Payer’s PSP, Euro Leg Entry PSP and/or as Euro Leg Exit PSP.

Furthermore, the OCT Inst scheme adherence process defines specific adherence roles which do not exist under the SCT and SCT Inst schemes:

• PSPs established in and/or licensed to operate in a country or territory included in the SEPA schemes’ geographical scope, and operating in the Euro Leg, can adhere on an individual basis as a participant.
   
• So-called OCT Inst processors can also adhere to the OCT Inst scheme as they may already serve a large community of PSPs for which they have designed or will design specific rules for OLO transaction processing. A SEPA-wide reach for the OCT Inst scheme through legal commitments with OCT Inst processors can be achieved much faster than on an individual PSP basis.

What's next?

The OCT Inst scheme goes live on Tuesday 28 November 2023 at 08h00 CET.

Up to 31 December 2023, any person or organisation can submit a change request to version 1.0 of the 2023 OCT Inst scheme rulebook in accordance with the EPC Payment Scheme Management Rules.

The received change requests will then be considered during the scheme rulebook change management cycle to be held in 2024. A new OCT Inst scheme rulebook version and associated implementation guidelines will be published in November 2024 and will take effect in November 2025.