What is TIPS?
TARGET Instant Payment Settlement (TIPS) is a market infrastructure service launched by the Eurosystem 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. 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, now replaced by T2, and settles payments in central bank money. TIPS settles payment transfers in euro and, as of February 2024, in Swedish kronor. Danmarks Nationalbank is also preparing to onboard to TIPS, and Norway and Iceland have shown interest in joining.
Why TIPS?
The full deployment of instant payments is one of the goals set out in the Eurosystem's retail payments strategy. To help pave the way for the rollout of instant payments, the Eurosystem launched TIPS.
TIPS provides a service which helps ensure that any bank account holder in Europe can be reached. It has two features which help ensure reachability across the whole of Europe. First, TIPS is compliant with the SEPA Instant Credit Transfer (SCT Inst), the scheme for pan-European instant payments. Second, as an extension of T2, TIPS has access to an extensive network of participants across Europe.
Brochure - Instant payments: TIPS for getting there
How does TIPS work?
TIPS offers final and irrevocable settlement of instant payments in euro and Swedish kronor. This settlement in TIPS takes place in central bank money, at any time of day and on any day of the year.
Eligible payment service providers participating in T2 can open a TIPS account for instant payments in euro with their national central bank. During the T2 opening hours, payment service providers can move liquidity from their T2 account to their TIPS account. The liquidity held in their TIPS account is used to settle instant payments.
Here is a breakdown of the steps involved in settling an instant payment transaction with TIPS:
- A participant sends an SCT Inst payment transaction message to TIPS.
- TIPS validates the incoming message and reserves the amount to be transferred.
- TIPS forwards the payment transaction for acceptance to the receiving participant.
- The receiving participant sends a positive reply to TIPS.
- TIPS performs settlement.
- TIPS confirms settlement to the sending participant.
- TIPS confirms settlement to the receiving participant.
TIPS is built on a modern and advanced technical solution that was developed specifically for the purpose of settling instant payments. This technical solution is designed to:
- secure an end-to-end processing time of ten seconds or less;
- support the expected large volumes of transactions and meet scalability requirements;
- secure availability around the clock without maintenance windows;
- enable a deployment process with no interruption in the service.
Participation
TIPS adheres to the same participation rules as are valid for T2.
There are three ways to access TIPS:
- participant - owns a TIPS account (dedicated cash account (DCA) for instant payment settlement in TIPS )
- reachable party - accesses a participant’s TIPS account by entering into a contractual agreement with that participant
- instructing party - enters into a contractual agreement with one or more participants/reachable parties to instruct on their behalf
To ensure the full deployment of instant payments across the euro area, the ECB requires that all payment service providers that adhere to the SCT Inst scheme and are reachable in T2 become reachable in a TIPS central bank money liquidity account, either as a participant or as a reachable party.
Multi-currency and cross-currency capability
Since February 2024 it has been possible to settle instant payments in Swedish kronor in TIPS using the system’s multi-currency functionality. Danmarks Nationalbank plans to make the Danish krone available for settlement from April 2025 too, allowing it to become the third currency in the system.
The ECB started investigating whether TIPS could support cross-currency instant payment transactions back in 2020, and if so how this might be done. In October 2024 the ECB Governing Council decided to implement a cross-currency settlement service in TIPS, building on that exploratory technical work. The initiative is a collaboration with Danmarks Nationalbank and Sveriges Riksbank. Danmarks Nationalbank joined in 2024, following its decision to migrate instant payments in Danish kroner to TIPS. Other countries that join TIPS at a later date would similarly benefit from cross-currency instant payments.
Cross-currency capability will enable Swedish and Danish consumers to transfer funds in their domestic currency to a retailer or individual in any euro area country, with payment received in euro in a matter of seconds. In the same way, customers and retailers in the euro area will be able to use euro to pay for goods bought in Sweden or Denmark. The service will also allow transfers to be made between Swedish and Danish accounts.
The initiative is in line with the Eurosystem’s objective of improving cross-border payments across the European Union. A key goal of the retail payments strategy is to make it easier for businesses and consumers in Europe to make and receive payments to and from other countries. At present transfers to non-euro area countries in the EU are slow, complex and expensive when currency conversion is needed. The international role of the euro and the EU’s open strategic autonomy objectives would also benefit from increased efficiency in cross-border payments.
In addition, the global outlook of the initiative means it fits with the G20 roadmap to improve cross-border payments, which includes interlinking as one of its priorities. For this purpose, in October 2024 the ECB Governing Council decided to launch exploratory work on linking TIPS with other fast payment systems. The work will include developing links with partners outside the EU, with a view to improving cross-border payments globally.
Pricing
The pricing structure for the TIPS platform is applicable as of 1 January 2024.
TIPS operates on a full cost-recovery and not-for-profit basis.
There are no fees to join TIPS.
The price per instant payment transaction is fixed at 0.2 cent (€0.002), which is shared equally between the sending participant and the receiving participant in TIPS (i.e. €0.001 for the Originator and €0.001 for the Beneficiary).
In addition, monthly fees for holding the accounts on the platform apply for payment service providers (PSPs) and automated clearing houses (ACHs) connected to TIPS.
Transactions that are settled internally by ACHs are subject to degressive fees (i.e. a sliding scale) whereby the price per transaction falls as the number of transactions per month rises (see slide 8 of this document).