OCT Inst is a scheme that describes how payments with a euro leg within the SEPA area and a non-euro leg in other currencies and/or outside the SEPA area can be processed in real time – including intermediaries, fee structures, FX information, and status codes. In short: OCT Inst provides a “language” that connects SEPA Instant and global cross border payments.
In doing so, OCT Inst addresses the very weaknesses of traditional correspondent banking chains: opaque fees, liquidity tied up in nostro accounts, inconsistent cut-off times, and lead times that are difficult to predict. With OCT Inst, correspondent banks can transfer the euro leg of cross border payments into a standardized real-time corridor – thereby significantly increasing speed and transparency.
OCT Inst serves as the technical “language”, that enables SEPA Instant to be integrated into global cross border payments – making it a strategic tool for correspondent banks.
Banks that implement OCT Inst early can consolidate payment flows, reduce reliance on nostro accounts, and position themselves as real-time correspondents in the SEPA area.
Initiatives such as TIPS X-CCY and Nexus build on this foundation and offer prospects for connecting the SEPA area to international real-time payment networks.
Real-time payments within the SEPA area are already a reality thanks to instant payments – but this is not the case for global real-time payments. While the G20 Payments Roadmap sets ambitious goals for faster, cheaper, and more transparent cross border payments, many banks still lack the necessary operational and technical foundations. OCT Inst closes this gap: as a standardized basis for global instant payments – and as an opportunity for correspondent banks to redefine their role.
OCT Inst Is the Foundation for Instant Cross Border Payments
Those who implement OCT Inst today are laying the groundwork to participate in global real-time networks tomorrow – rather than being left behind.
An important point: OCT Inst is not just a concept. Iberpay provides the first proof of concept that cross border payments can be sent, received, and processed in real time according to OCT Inst rules – a clear signal to the market that global instant payments are technically and operationally feasible.
Correspondent Banks in Transition: From Nostro Account Manager to Real-Time Correspondent
For correspondent banks, OCT Inst represents a paradigm shift. Until now, the business model has relied heavily on bilateral account relationships and nostro liquidity. In the future, the euro leg of cross border payments can be settled in central bank money via TIPS or RT1 – making nostro accounts in the euro area less relevant.
This opens up two strategic roles:
- Real-time correspondent in the SEPA area:
Banks that implement OCT Inst and are reachable via TIPS/RT1 can handle real-time settlement of the euro leg for other institutions – 24/7, with structured fee and status information. - FX/Cross-Currency Service Provider:
In combination with TIPS Cross-Currency (TIPS X-CCY), specialized institutions can provide FX conversions in multiple currencies and handle the operational complexity on behalf of other banks. OCT Inst provides the uniform messaging and business rules framework that TIPS X-CCY will be based on in the future.
This shifts the focus of value creation: away from purely bilateral nostro relationships toward a role as an “instant hub” that aggregates payment and FX volumes while also supporting the requirements of the G20 Payments Roadmap.
G20 Payments Roadmap & Nexus: OCT Inst as an Enabler
The G20 roadmap addresses, among other things, the following goals: cheaper, faster, more transparent, and more accessible cross border payments. However, the latest progress report shows that, in the retail sector, progress on costs and speed has been limited so far.
This is where global initiatives such as TIPS X-CCY and Nexus come in:
- TIPS X-CCY extends TIPS to include cross-currency settlement in multiple currencies. The business logic is based on the OCT Inst Rulebook – the more this is harmonized, the easier it will be to standardize and process cross border payments in real time.
- Nexus takes the approach of connecting national instant payment systems via a central scheme and dedicated gateways. In the SEPA context, OCT Inst serves as a compatible real-time format, on the basis of which TIPS could potentially be connected to Nexus in the future.
For banks, this means: Those who implement OCT Inst today are investing not only in “local” optimization, but also in connectivity to future multilateral networks.
OCT Inst is the language through which TIPS X-CCY and Nexus will communicate with the SEPA area.
Whitepaper on OCT Inst & Instant Cross Border Payments
Would you like to delve deeper into use cases, role models, and architectural considerations?
In our whitepaper OCT Inst: those who fail to act will be left behind in real time! we analyse:
- tangible OCT Inst quick wins for correspondent banks,
- the role of TIPS X-CCY in the context of Instant Cross Border Payments,
- and a prospective example for TIPS x Nexus.
What Correspondent Banks Should Do Now
For correspondent banks, three immediate areas of action can be derived from OCT Inst and the G20 Payments Roadmap, which we examine in greater detail in our whitepaper:
- Establish OCT Inst as a technical foundation
- Clarify roles within the cross border payments ecosystem
- Think beyond real-time capabilities beyond the Euro-Leg
Those who set this course early will not be caught off guard by global real-time initiatives, but can actively leverage them – as a modern correspondent bank player in the age of OCT Inst, Global Instant Payments and Nexus.
Authors
Senior Consultant
Senior Consultant
