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ECB takes steps to ensure pan-European reach of instant payments

24 July 2020

The ECB’s Governing Council has taken significant steps to support the full deployment of instant payments across the euro area, in line with objectives shared with the European Commission.

Pan-European instant payments can be ensured by the end of 2021. All Payment Service Providers (PSPs) which have adhered to the SCT Inst scheme and are reachable in TARGET2 should also become reachable in a TIPS central bank money liquidity account, either as a participant or as reachable party (i.e. through the account of another PSP which is a participant). At the same time, all Automated Clearing Houses (ACHs) offering instant payment services should migrate their technical accounts from TARGET2 to TIPS. The Eurosystem will discuss with ACHs and PSPs whether a migration window is needed for this purpose.

This will enable the following.

  • The possibility of instant payments across the currency area.
  • PSPs to comply with the SEPA regulation: PSPs which have adhered to SCT Inst will now be able to comply with their legal obligations, without depending on the actions of other PSPs or ACHs.
  • Make reachability a commodity, reflecting the fact that it is a legal requirement: Not only would TIPS benefit from 100% pan-European reachability, but all ACHs competing in the provision of instant payment services would automatically make this part of their service offer. ACHs would no longer depend on bilateral agreements to establish links, and there would be no potential credit exposure for cross-ACH transactions.
  • Remove liquidity traps: ACH accounts can be funded/defunded from central bank money accounts in TIPS at any time, unlike the current limitations imposed by the opening hours of TARGET2. This also facilitates moving liquidity from one ACH to another without any time limitation, which can be particularly valuable during long weekends.
  • A competitive marketplace where each PSP may decide independently (i) where to instruct (in an ACH or in TIPS) and (ii) where to hold its liquidity and settle (in an ACH or in TIPS). The choice that one PSP makes in this respect does not condition the choices of other PSPs.

The ultimate goal is to enable European citizens to make electronic payments in euro from and to any country in real time, both in physical shops and online.