Paving the way for ECB TARGET Instant Payment Settlement (TIPS)
24 / 06 / 2021
Instant payments are gaining ground. With TARGET Instant Payment Settlement (TIPS), the European Central Bank wants to make a change.
Guest blog by Gerard Scheepers, Senior Management Consultant Payments, equensWorldline
Instant payments are gaining ground within the European Union and are gradually becoming part of the ‘new normal’. Nowadays, more and more customers are getting used to the fact that payments are also processed in the evening or during weekends. This contrasts with executing the payment in batches at a later time. Especially countries such as the Netherlands, Belgium and Spain are leading the way within the EU when it comes to instant payments. Over there, many banks offer this form of payment processing free of charge, as a service towards end customers.
Banks in these countries often work together within one ecosystem to make these instant payments possible. This means that the various payment service providers are all connected to the same processor, and they can easily process the payments. After all, they work together within the same ecosystem, which ensures a uniform language. However, when someone from Spain, for instance, wants to transfer money quickly to a bank account in the Netherlands, the speed of instant payments is often not yet possible.
Extended reach
Currently, there is no direct connection between the Spanish and Dutch ecosystems for the processing of instant payments. This means that both person-to-person payments and business payments have a slower processing speed. In order to change that, the European Central Bank (ECB) has established the TARGET Instant Payment Settlement (TIPS) initiative. This market infrastructure service enables payment service providers to offer their customers real-time money transfers at any hour of the day, any day of the year. With the help of TIPS, individuals and companies can transfer money between each other within seconds, by connecting the different ecosystems.
In the business world, it may happen that a certain order is only shipped after payment has been received. Otherwise, that truck, cargo ship or plane will not start moving. This is particularly relevant in the current pandemic. After all, in the case of vaccines or face masks, every second counts, and you simply cannot wait three business days before it is confirmed that the money has been received. TIPS thus ensures that business-to-business, as well as private payments, are processed within a split second.
Common ground
equensWorldline is one of the European front runners when it comes to instant payments. We process approximately 1.5 million transactions per day, with peaks of up to 2 million transactions per day. These numbers continue to rise and one of those drivers is mobile payments. Almost all private individuals use their mobile phone to initiate a payment. One of the ways we contribute to TIPS, is through the equensWorldline Smart Routing Service. We convert the different data formats of sending payment service providers into the correct values for the receiving party. This is done at the back of the process and in mere seconds, which allows banks to fully focus on their customers instead of deciphering different data formats.
In addition, TIPS fits in seamlessly with the larger goal of the European Union with the European Payment Initiative (EPI). When, for example, a Dutch customer wants to make a purchase in an Italian online shop, the customer can only use the payment methods available in the Italian market. A method such as iDEAL, which is commonly used in the Netherlands, has no share in Italy. The example also functions the other way around, as the Italian customer is not familiar with iDEAL. Connecting the different ecosystems through TIPS also makes it easier to realise one umbrella payment method within the Eurozone. That is why I am extremely proud that at equensWorldline, we can contribute to the future of fast, safe and reliable payments within the EU.
Paul Jennekens
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