TARGET Instant Payment Settlement (TIPS) is a new market infrastructure service launched by the Eurosystem in November 2018 as a response to growing consumer demand for instant payments across Europe and to ensure that national solutions do not reintroduce fragmentation into the retail payments market in Europe.
There are two features of TIPS that will help it achieve reachability across the whole of Europe. First, it is based on the SEPA Instant Credit Transfer (SCTInst) scheme and, second, it was developed as an extension of TARGET2, which already has an extensive network of participants.
This new market infrastructure service enables payment service providers (PSP) to offer fund transfers to their customers constantly in real time and around the clock, every day of the year. This means that thanks to TIPS, individuals and firms can transfer money between each other within seconds, irrespective of the opening hours of their local PSP. Consequently, the Eurosystem, in order to promote the smooth and efficient operation of payments systems, extended the TARGET services spectrum in order to also support the settlement of instant payments, thus offering pan-European reachability and interoperability. TIPS currently only settles payment transfers in euro. However, in case of demand other currencies could be supported as well.
TIPS is a service based on the modern architecture of payment systems that combines the advantages of a retail payment netting system and a Real Time Gross Settlement System (RTGS). Consequently, it is capable of instantly settling a large volume of payments at relatively low cost. Furthermore, it is compatible with the strict supervision requirements of the Eurosystem, as well as with the CPMI-IOSCO guidance on cyber resilience for financial market infrastructures. As a result, it is capable of meeting the settlement requirements of a pan-European solution for instant payments (as defined by the European Payments Council) and to offer 100% security against settlement risk, since the transactions are carried out in central bank money.
Features of TIPS
- robust: It is a powerful and robust market infrastructure managed by the Eurosystem.
- efficient: It offers instant settlement in central bank money, which increases security and eliminates credit risk, and simplified processing of transactions due to the direct connection between the originator PSP and the beneficiary PSP.
- fast: TIPS participants can process transactions in only a few seconds, less than those set by the SCTΙnst scheme (10 seconds) as the criterion for the completion of an instant payment.
- multi-participant: It is an extension of TARGET2, which has a network of 1,700 participants that can open an account, while all other interested parties can connect indirectly with various roles.
- economical: Its pricing policy is based on the principles of equality and non-discrimination; TIPS and charges no entry or account maintenance fees and offers free receipt of payments and statements, while the price per payment will be 0.20 eurocent (€0.0020) for the first two years of operation.
- unified: There are significant advantages for participants, especially regarding liquidity management, since the balances on TIPS account will count towards their required minimum reserve.