The landscape of payment systems has been evolving rapidly, particularly since the introduction of instant transfers in 2017 across the 36 countries within the SEPA area. Instant payments have become a cornerstone of a digital and efficient economy, enabling seamless, 24/7 transactions between bank accounts with immediate crediting of funds to the beneficiary. This innovation not only streamlines payment and collection reconciliation but also significantly enhances the overall user experience.

In addition to delivering substantial usability improvements for businesses and individuals, instant payments strengthen Europe’s financial sovereignty and autonomy. As the foundation of an efficient, secure, and competitive payment alternative to traditional, often costlier instruments such as cash or cards, instant payments also promote financial inclusion by expanding access to banking services for a wider population. Moreover, they enhance the competitiveness of European businesses, enabling them to operate more efficiently in an increasingly globalized market.

The adoption of instant payments across all sectors of the economy presents significant untapped potential, driven by the European Commission's Regulation aimed at generalizing their use throughout the SEPA area. This regulation requires PSPs already providing standard transfers to also offer instant transfers, utilizing the same channels -such as online banking and bank branch services- and ensuring that the price of instant credit transfers for clients does not exceed that of standard ones.

The G20 Sets a Roadmap for Faster and More Transparent Payments.

Cross-border payments involving transactions beyond the Eurozone frequently suffer from lengthy processing times, high costs, and challenges related to accessibility and transparency. Addressing these issues has become a key priority for many international organisations, including the G20, the Financial Stability Board (FSB), the Bank for International Settlements (BIS), the European Commission, the World Bank, and the International Monetary Fund (IMF). These bodies are focused on improving multi-currency international payments by enhancing speed, transparency, affordability, availability, and accessibility.

In April 2020, the G20 concluded that “multi-currency cross-border payments are slow, expensive, non-transparent, and limited in accessibility.” Later that year, the G20 identified 19 areas for improvement and devised a comprehensive roadmap with specific actions to be implemented by 2027, focusing on five key areas:

1. A Common Strategy: Encouraging collaboration between public and private sectors to improve cross-border payments.
2. Regulatory and Supervisory Coordination: Harmonising frameworks for AML (anti-money laundering), CTF (counter-terrorist financing), KYC (know your customer), and secure corridors.
3. Enhancing Existing Payment Infrastructures: Tackling issues such as accessibility, overlaps, and delivery-versus-payment mechanisms.
4. Improving Information and Automation: Promoting the harmonised use of ISO 20022 standards and APIs.
5. Exploring New Payment Infrastructures: Investigating the potential of central bank digital currencies (CBDCs), innovative platforms, and stablecoins.

These international organisations have also determined that improving cross-border payments would drive greater global economic growth, particularly in countries where remittances from migrants play a crucial role in their economies. In some countries, remittances account for as much as 25% of GDP. Enhancing these payment systems would have significant benefits for international trade, simplify financial management for companies operating across borders, and improve payment processes for the growing number of individuals who study, work, or live outside their home countries.

Additionally, the United Nations’ Sustainable Development Goals for 2030 explicitly include a target to reduce the cost of remittances to just 3% of the transaction amount. Despite the high priority given to this issue by supranational bodies, the average cost of remittances remains very high at around 6%, with little progress made over the past two years in lowering this figure.

European leadership: The One-Leg Out 'OCT Inst' scheme

In November 2023, the European Payments Council (EPC) launched the One-Leg Out (OCT Inst) scheme, an initiative designed to facilitate instant account-to-account international transfers. This scheme enables Payment Service Providers (PSPs) within the SEPA area to process incoming and outgoing international transactions efficiently and in real time. OCT Inst establishes the rules, practices, and standards required to achieve interoperability for instant cross-border payments, provided that one party in the transaction is based within the SEPA zone.

According to the European Central Bank’s definition, a One-Leg Out (OLO) transaction is:

• A transaction in any currency, provided that at least one leg of the payment is denominated in euros.
• An incoming or outgoing credit transfer between bank accounts.
• A payment processed instantly in the euro leg of the transaction, at any time, 24/7/365.

Leveraging the technology and infrastructure of instant payments, the OCT Inst scheme aims to enhance the cost, transparency, and speed of multi-currency international payments. This aligns with the objectives set by the G20 and the United Nations, while enabling banks to expand their range of services.

The introduction of instant international payments offers numerous benefits to the economy and its stakeholders:

1. Speed: International transactions are settled and credited within seconds or minutes.
2. Availability: Real-time, 24/7 operations eliminate the limitations caused by different time zones in local payment infrastructures.
3. Cost: Variable transaction fees are up to 100 times lower than traditional alternatives.
4. Traceability: Complete payment information is made available.
5. User Experience: Improved transparency and accessibility lead to a superior customer experience.
6. Network Effect: Minimal impact on existing systems, as current instant payment rails are repurposed for this use case.
7. Innovation and Competition: New services and solutions foster market competitiveness.

By connecting the instant payment systems from different countries for international transfers, the scheme addresses one of the main barriers to cross-border payments: the differing availability of the payment systems in various time zones. For example, Australia has made significant advancements in the adoption of instant payments domestically in recent years. Under the traditional system, transferring money from Australia to Spain could take days due to the limited operating hours of international transaction processing. With the adaptation of domestic instant payment systems to ensure global interoperability, funds can now reach their destination in seconds, at any time of the day, thanks to both Australia’s and Spain’s instant payment infrastructures operating on a 24x7x365 basis.

The role of Iberpay

As with the launch of the instant credit transfers, Spain’s banking sector and Iberpay continue to lead the way in technological innovation for payment systems. They remain pioneers in preparing payment infrastructure and banking institutions for the processing of instant cross-border transfers.

In July 2023, Iberpay led Europe’s first real-world pilot project to receive and process instant international payments initiated in other currency areas. This initiative included participation from Swift, Spanish banks CaixaBank, Banco Santander, and BBVA, as well as leading financial institutions from Australia, New Zealand, Brazil, and the United Kingdom. Additionally, Iberpay became the first payment system globally to integrate with Swift’s “tracker,” enabling real-time updates on the status of international payments on behalf of participating institutions. This advancement significantly enhances payment traceability and transparency.

In May 2024, Iberpay and Banco Santander announced a pioneering achievement: their respective payment platforms processed the world’s first instant international transfers based on the OCT Inst scheme, initiated and completed in different currency areas. Iberpay became the first payment system in Europe to be certified and prepared to process instant cross-border transfers originating from or destined outside the Eurozone under the One-Leg Out (OCT Inst) scheme developed by the European Payments Council (EPC). Simultaneously, Banco Santander was the first European bank to adopt the OCT Inst scheme and Iberpay’s service, positioning itself as the first bank in Europe ready to offer this service to its clients.

Following unanimous agreement within the Spanish banking community, all Spanish banks joined the One-Leg Out (OCT Inst) scheme of the EPC and Iberpay’s service in November 2024. This scheme leverages Iberpay’s instant payment standards and processing capabilities to enable real-time multi-currency payments. This milestone positions Spain as the first and only European financial community connected to this innovative platform, consolidating the Spanish banking sector’s leadership in instant and cross-border payment technologies.

In addition to its technological and operational advancements in instant payments, Iberpay plays a key role in promoting international institutional collaboration. It actively participates in the Cross-Border Payments Interoperability and Extension Taskforce (PIE) under the Committee on Payments and Market Infrastructures of the Bank for International Settlements (BIS) in Basel. This group brings together major central banks, global and regional banks, remittance companies, card networks, banking associations, and international market infrastructures to enhance the global processing of cross-border payments. Through this involvement, Iberpay strengthens its commitment to developing innovative solutions that support the advancement of cross-border payments on a global scale.