MIP OnLine - 2019

TIPS for instant payments: reshaping the market and our daily lives

February 2019

The European Central Bank (ECB) has redefined the payments landscape with the launch of TARGET Instant Payment Settlement (TIPS). This pan-European service went live on 30 November 2018, enabling users across Europe to send and receive payments immediately, around the clock and irrespective of their location.

The ECB offers TIPS to banks at the low price of €0.002 per transaction, so that they in turn can provide the service to merchants and consumers at a similarly competitive price. For its part, the ECB is committed to establishing a single domestic market for Europe, and TIPS fosters this vision by making it easier to harmonise instant payments. This article takes a closer look at the unique benefits that TIPS offers to European businesses and consumers.

TIPS benefits for businesses

Elimination of credit risk

Businesses using TIPS-based solutions can settle transactions instantly and irrevocably. There is no need for them to issue any payment guarantees because there is no risk of a payment failing to come through. TIPS-based payment solutions can therefore be new, efficient and cheap ways for shop-owners to accept payments.

Optimised cash flow

With TIPS, incoming and outgoing instant payments are credited and debited immediately. This means businesses can use TIPS-enabled solutions to reconcile their incoming payments more efficiently, thereby optimising their end-to-end payment process. Small medium-sized businesses and large corporates stand to gain a lot from having faster access to their working capital and seeing their cash flow more freely.

Pan-European reach

The TIPS service can be used for carrying out instant payments anywhere in Europe. As modern-day merchants typically engage with an international customer base, an instant payment service that offers immediate settlement Europe-wide can simplify and expedite their business processes.

TIPS benefits for consumers

Immediate transfers

TIPS is a seamlessly integrated service that makes it easier to develop innovative payment solutions. Consumers making instant payments with TIPS-enabled solutions will enjoy a smooth payment process, with convenient ways to directly initiate each payment and get immediate confirmation once the payment has been successfully executed.

For example, a European citizen looking to make an urgent payment can use a TIPS-enabled application to transfer the funds and be notified immediately once the other party has received them. This process allows consumers to monitor their transactions in real time and manage their liquidity in the most efficient way possible.

Send money anywhere in Europe

Today consumers can make cash payments in euro across all the countries of the euro area. On top of that, the Single Euro Payments Area (SEPA) initiative harmonised credit transfers and direct debits in all SEPA countries. Now, thanks to TIPS, consumers can just as easily make instant payments across Europe.