The European Central Bank launched the TARGET Instant Payment Settlement, or TIPS, on Friday (Nov. 30), with the aim of competing with PayPal and other payment tech giants, according to a report by Reuters.
TIPS allows customers and companies to transfer euros in seconds, whether the local bank is open or not. Currently, instant payment platforms are the dominion of companies such as PayPal, Google, Facebook, Amazon and China’s Alibaba and Tencent.
The service is starting small, with only eight medium or smaller banks from Spain, Germany and France signed up so far. The largest bank to join is Spain’s Banco Bilbao Vizcaya Argentaria (BBVA). Other participating banks include Spain’s Abanca Corporación Bancaria, Banco de Crédito Social Cooperativo and Caja Laboral Popular Cooperativa de Crédito, as well as Germany’s Berlin Hyp and TeamBank.
“We need to address the reasons for the scarcity of major European players in the payments market,” ECB Director Yves Mersch said while unveiling TIPS in Frascati, Italy. “If there is a lack of investment capacity … we should not shy away from pooling resources and volumes and creating bigger players.”
TIPS was developed by the Banca d’Italia, which manages it, and in cooperation with other central banks in Europe.
PayPal welcomed the news and said it wanted “more collaboration across the payments industry.”
The first transaction through TIPS happened on Friday between someone from CaixaBank in Spain and Natixis, a French bank. Payments reportedly take up to 10 seconds to process and cost .002 of a euro – one fifth of a euro cent.
To use TIPS, customers have to have an account at a central bank connected to the Eurosystem’s TARGET2 network. This means it is only currently useable by European Union banking institutions.
The system only uses euros, but the ECB said it has the capability to use other currencies if there’s enough demand.