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Faster Payments

How TIPS Is Helping ECB Expand Its Real-Time Payments Reach

Sweden recently became the first nation outside the eurozone to join TIPS, the European Central Bank’s real-time payment platform — setting the stage for other countries to do so in the future. In the latest Faster Payments Tracker®, PYMNTS spoke with the European Central Bank to understand how Sweden’s decision to join up lays the legal and technical framework for Pan-European real-time cross-border payments.

The European Central Bank (ECB) is the European Union’s foremost regulatory body. It also works to ensure that financial products and services can be distributed as smoothly and safely as possible.

Accomplishing this task poses a unique set of challenges, however, particularly when it comes to real-time payments. The 27 EU member states have their own financial systems, and many have also implemented their own domestic real-time payments rails. Making cross-border payments in the EU therefore requires interconnectivity between the regions’ various real-time payments rails.

This is just one of the cross-border payments frictions that led to the TARGET Instant Payment Settlement (TIPS) system. TIPS is a real-time payments network that the ECB created to build a more streamlined, interoperable Pan-European instant payments rail — one that allows for funds to be transferred quickly and seamlessly among all EU nations on a 24/7 year-round basis.

The ECB sees TIPS as more than just another real-time payments solution, however. The network is also a key component of its broader drive to harmonize the European financial system.

“The Eurosystem [aims to create] an integrated payments area in Europe where solutions are based on a common scheme, and Pan-European market infrastructures, such as TIPS, [bring] benefits to citizens and businesses alike,” the ECB told PYMNTS in a recent interview.

Its efforts have thus far been driven by a multi-pronged approach that aims to address both structural and legal payment frictions.

The Past and Future of EU Real-Time Payments

TIPS is able to provide the interoperability necessary to make cross-border transactions because it relies on the SEPA Instant Credit Transfer (SCT Inst) scheme. SCT Inst was developed in 2017 to establish operational guidelines by which all real-time payment rails in the EU are required to comply. This marked the first real-time payments regulatory framework in the region that addressed all EU countries.

The ECB created TIPS upon this framework, and it provides real-time settlement capabilities across the region. The network’s design also includes a hidden springboard for future expansion as it comes equipped with multicurrency functionality, opening the door for countries that do not use the euro to connect to the TIPS network and access its real-time payments services.

This functionality has already attracted the interest of central banks from outside the EU. Sweden’s central bank, Sveriges Riksbank, recently became the first outside the eurozone to tap into the service, striking a deal with the ECB that will allow consumers to settle funds in Swedish krona. The agreement is the first of what could become a broader movement of central banks to join the network.

The ECB said it is taking active measures to expand the TIPS infrastructure beyond the eurozone.

“The ECB is supporting and actively contributing to the work on the Financial Stability Board roadmap to enhance cross-border payments, in coordination with relevant international organizations and standard-setting bodies — notably the Bank for International Settlements [and the] Committee on Payments and Market Infrastructures,” the ECB told PYMNTS.

The Committee on Payments and Market Infrastructures (CPMI) monitors central banks’ ability to clear and settle funds safely, efficiently and in accordance with international and domestic regulations. It also is a forum where central banks of different nations collaborate on joint policy initiatives, carrying out the regulatory and financial framework embedded in the TIPS real-time payments infrastructure.

Best-Laid Plans

The ECB’s collaboration with the CPMI extends far beyond TIPS. The two bodies also collaborate in the area of cybersecurity, primarily via the Eurosystem Cyber Resilience Strategy.

The Eurosystem Cyber Resilience Strategy is related to the EU’s real-time payments network and seeks to enforce CPMI and International Organizations of Securities Commissions (CPMI-IOSCO) guidelines over digital transactions, including real-time payments and other services.

“The objective of the strategy is to improve the cyber resilience of the euro area financial sector as a whole by enhancing the ‘cyber readiness’ of individual financial market infrastructures, including the ones operated by the Eurosystem, and to foster collaboration among financial market infrastructures, their critical service suppliers and the authorities,” the ECB said.

Official guidelines and regulations can only go so far, however. Even the most sophisticated top-down efforts to stop cybercrime can fail if efforts are not coordinated, and that starts from consumers being more cautious.

“It is important that customers also take personal responsibility,” the ECB said. “Simply downloading an app and accepting all terms and conditions, without being aware of the consequences and potential fraud, is suboptimal.”

It calls for individual consumers to take responsibility for their part in the financial sector’s broader struggle to counter cybercrime.

This shows that payments harmonization and faster transaction speeds are only two facets of facilitating real-time, cross-border transactions. It is equally imperative to collaborate to secure those transactions with efforts led by both consumers and central banks.



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.