TARGET Instant Payment Settlement (TIPS) is a new market infrastructure service launched by the ECB in November 2018. It enables payment service providers to offer fund transfers to their customers 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 bank.
TIPS was developed as an extension of TARGET2 and settles payments in central bank money. TIPS currently only settles payment transfers in euro. However, in case of demand other currencies could be supported as well.
As a response to the growing consumer demand for instant payments, a number of national solutions have been developed, or are under development, across the EU. A challenge for the Eurosystem is to ensure that these national solutions do not (re)introduce fragmentation into the European retail payments market. TIPS aims to minimise this risk by offering a service that can help ensure that any bank account holder in Europe can be reached.
There are two features of TIPS that will help it achieve reachability across the whole of Europe. First, TIPS is based on the SEPA Instant Credit Transfer (SCT Inst) – a scheme for pan-European instant payments, expected to be used by a large number of payment service providers across Europe. Second, TIPS was developed as an extension of TARGET2, which already has an extensive network of participants across Europe.
TIPS offers final and irrevocable settlement of instant payments in euro, at any time of day and on any day of the year. Participating payment service providers can set aside part of their liquidity on a dedicated account opened with their respective central bank, from which instant payments can be settled. It is only possible to add funds to TIPS accounts during TARGET2 opening hours.
As settlement in TIPS takes place in central bank money, participation in TIPS depends on being eligible to access central bank money. For this reason, in order to open an account in TIPS in euro, an institution needs to fulfil the same eligibility criteria as for participation in TARGET2.
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