Alberto López Nestar, Deputy CEO at Iberpay: "Our efforts are focused on trying to deploy the full potential of Request to Pay"

About Alberto López Nestar

Alberto López Nestar is the Deputy CEO at Iberpay, leading the Technology, Projects and Innovation areas. Previously, he worked at Accenture, and his entire professional experience is related to the financial and technology sector. Since his incorporation to Iberpay in 2017, the company responsible for managing the National Payment System, he has carried out highly successful projects that are crucial for the financial sector, such as the implementation of sectorial infrastructures for instant transfer processing or innovation sector initiatives such as Smart Payments and Smart Money.

Alberto has a degree in Computer Science Management, a degree in Industrial Organisation Engineering, a diploma in Business Sciences, and has recently completed an Executive Development Program (PDD) at IESE Business School.

What is Iberpay's mission within the Spanish financial system?

Iberpay's main mission is the management of the National Payment System, a critical interbank payment infrastructure specialised in the processing and settlement of payment instruments based on the bank current account: credit transfers, instant transfers, direct debits, cheques, transfers and bills of exchange.

Iberpay connects banks, companies, and citizens to process their payments, thus fulfilling a critical and essential mission in society by facilitating the circulation of funds between the current accounts of different banks, facilitating and sustaining the country's economic activity.

Iberpay connects banks, companies, and citizens to process their payments facilitating and sustaining the country's economic activity

In addition, Iberpay plays a key role in the distribution of cash to Spanish financial institutions as the manager of the Sistema de Depósitos Auxiliares (SDA) and provides the sector with other high-value-added digital services, such as account transfer (automatic portability of current accounts between financial institutions), account ownership (verification of a client's account ownership in another financial institution), or fraud prevention.

What are the main technological challenges you face on a daily basis?

We currently live in a volatile, complex, and uncertain environment, with rapid technological evolution, which requires great agility and versatility to adapt to change. Iberpay is a primarily technological company, at the forefront of innovation in payments, with a culture of adaptation to change deeply ingrained, making us very agile and effective in environments with a high level of uncertainty. However, like any technological company, Iberpay faces numerous technological challenges, such as:

• Competition for attracting and retaining IT talent.
• Keeping up with the latest technological trends, such as Artificial Intelligence, data analytics, or Blockchain.
• The growing importance of the cloud, which is changing the way we develop and manage technological infrastructure.
• The importance of cybersecurity and proper data privacy management.
• The maintenance and management of numerous systems with different technologies, requiring a highly skilled multidisciplinary team.

Although these challenges may seem very complex, we feel fully confident thanks to the commitment of the entire team and the significant advances we are making in these areas.

What changes are we likely to see in the payment’s world in the coming years? What are the most relevant trends today and which are most likely to progress in the future?

The world of payments is booming. Payments between accounts have gone from being part of banks' Business as Usual (BAU) to being a differential factor on which to compete by offering their customers value-added services.

Since 2017, financial institutions have been offering their customers instant transfers, which are 24x7 real-time payments between accounts, meaning that funds are instantly credited to the beneficiary's account. These real-time push payments are highly successful in Spain, as Bizum uses instant transfers to make payments between its users' accounts. Currently, almost 50% of the transfers processed by Iberpay are instant.

On the other hand, Request to Pay or real-time payment requests are in full development and implementation in Spain, and are pioneering in Europe. This pull payment, together with instant transfers, opens up numerous opportunities in the payments sector, allowing financial institutions to offer a wide range of value-added services, such as real-time collection of unpaid bills, payment of electronic invoices between companies, or the replacement of traditional direct debits.

There are also other trends that are currently highly relevant, such as Open Banking or Buy Now Pay Later.

Regarding future trends that will be developed in the coming years, I would highlight programmable instant payments and tokenized digital money, with application in use cases developed in DLT and blockchain networks in the field of the Internet of Things (IoT), Industry 4.0, smart cities, metaverse, and Web 3.0.

What initiatives is Iberpay undertaking as part of these payment trends?

After the launch of instant transfers in 2017, incorporating the entire Spanish financial sector and some European banks, our efforts have focused on trying to deploy the full potential of Request to Pay. We are working alongside major financial institutions to develop and implement new use cases based on these online payment requests that allow entities to offer their customers new value-added services.

Additionally, since 2018 we have been working in a task force with responsible entities in payment, technology, and innovation areas to develop and promote sectoral initiatives such as Smart Payments (programmable instant payments) and Smart Money (tokenized digital money).

In 2020, Iberpay and the top five entities at that time (Caixabank, Santander, BBVA, Sabadell, and Bankia) successfully completed a Proof of Concept, verifying the feasibility of executing programmable instant transfers from DLT networks when certain pre-established conditions are met, through the execution of Smart Contracts and their connection with the National Payment System.

Currently, Iberpay is participating as a collaborator in a project led by Allfunds, which has been presented and approved in the Spanish regulatory Sandbox, and consists of testing a Multilateral Trading System for the trading of tokenized investment funds in a controlled production environment. Iberpay provides the Smart Payments solution to facilitate the settlement of transactions with fund shares according to the Delivery versus Payment model, thus eliminating any counterparty risk and streamlining the process.

Our efforts have focused on trying to deploy the full potential of Request to Pay

Regarding the Smart Money initiative, it emerged several years ago with the objective of evaluating and testing new technological alternatives to traditional forms of money and payments, analysing their technical feasibility and their ability to meet user needs. During these years, we have evaluated multiple possible designs: wholesale or retail, public or private, with universal or restricted access, with centralised or decentralised technology, among others.

Between October 2020 and June 2021, the first 17 financial entities and Iberpay carried out a new Proof of Concept that sought to validate new functionalities to address the sectoral distribution in the event of the Eurosistema's eventual issuance of a digital euro, incentivise public-private collaboration, promote innovation in payments and digitalisation of the economy, and evaluate its potential impact on the financial sector in accordance with the Eurosistema's recommendations and preferences.

The project focused on testing the distribution of a CBDC (Central Bank Digital Currency) through the Red-i (interbank DLT network) on behalf of financial entities to their customers in a testing environment managed by Iberpay. Within the scope, two models of digital money were tested, based on tokens and on ledger entries, in addition to simulating the issuance of this digital money by the monetary authority.

Finally, recently, the Banco de España has launched an experimentation program to use digital tokens for the settlement of wholesale payment and securities operations. Iberpay has submitted its Smart Money sector asset to the call for proposals, with the aim of issuing, distributing, and redeeming wCBDC (wholesale CBDC) tokens on behalf of the Banco de España to settle transactions with tokenized financial assets in Delivery versus Payment mode. If Iberpay's proposal is selected, we will work throughout this year on the design, development, and testing of this experiment, culminating in a report with the conclusions obtained.

What does the use of DLT and blockchain technologies bring to the financial sector and specifically to payments?

DLT technology enables the decentralisation of the operations or information used by financial infrastructures, as well as improving their resilience and traceability. Additionally, it facilitates the deployment of solutions that allow for the programming of payments and other use cases through Smart Contracts.

The automatic programming of payments allows these payments to not be initiated by any of the parties involved, but rather to be programmed in advance through software code and executed automatically when certain conditions previously agreed upon by the parties are met. These objective conditions are programmed into a Smart Contract, which, when verified, allows the agreed-upon payment to be initiated without additional intervention from the parties involved, and informs all participating parties on the DLT network that the payment has been completed and that the Smart Contract can continue processing the next lines of programmed software code.

Furthermore, within the field of DLT technology, there are already many initiatives for tokenizing all kinds of assets (financial assets, real estate assets, etc.) that aim to improve access to trading markets and make them faster, cheaper, and more secure. These tokenized assets can be settled on DLT platforms through a Delivery versus Payment procedure with an atomic token exchange (tokenized assets and tokenized digital money), 24x7, eliminating counterparty risk. This settlement procedure, possible on DLT networks, provides security, guarantees, and efficiency to the new financial asset trading platforms (bonds, stocks, investment funds, etc.).

What can the digital euro contribute in this new context in which we are already immersed?

Currently, central bank money is only available to the public in the form of cash. Consequently, in an increasingly digital world, there is a risk that cash will gradually become marginal as a means of payment. One of the objectives of the Eurosystem is to preserve the role of public money as a monetary anchor of the payment system, and in particular, a digital euro would offer an electronic means of payment issued by the central bank that would be accessible to all citizens throughout the euro area. This digital euro would complement cash, not replace it, and contribute to preserving the role of central bank money as a stabilising force in the payment system.

As for what advantages it could bring compared to current means of payment, it remains to be seen as the Eurosystem is still in the research phase and has not yet finalised the definitive design of the future digital euro. However, according to statements from the Eurosystem, a digital euro would create synergies with private payment solutions and contribute to a more innovative, competitive, and resilient European payment system by serving as a unifier of Europe's digital economies.