The European Central Bank (ECB) officially announced on 22 June 2017 that it will offer an Instant Settlement service, called TIPS (TARGET Instant Payment Settlement), starting from November 2018. Their aim is to ensure the demand for Instant Payments is met at European level and to further facilitate the integration of the euro area.
The ECB has already published its draft User Requirements Document, which shows the ECB aims for this new Instant Settlement service to be fully compliant with the European Payments Councils Instant Payments initiative, SCT Inst and will offer banks and Payment Service Providers (PSPs) the ability to settle instantly at the European Central Bank, effectively eliminating credit and liquidity risk. This is important, as this allows volumes and value to grow without increasing risk for the users of Instant Payments.
Two settlement models
With the projects in the aforementioned countries well underway and all based upon the use of a model with a Clearing and Settlement Mechanism (CSM) and settlement based on the TARGET2 ASI6 Real Time settlement model, this is not compatible with TIPS. Banks and PSPs need to make a decision in which model they wish to participate in, or even to participate in both.
As mentioned before, local communities have specific requirements, and these specifics may not be supported by TIPS, but this will be supported through the CSM model. The two models thus will coexist and be complementary.
Some CSMs, among which equensWorldline, have already expressed their intention to connect to TIPS as an Instructing Party. This then allows banks to connect to their preferred CSM through a single technical connection and a single gateway, while benefitting of the additional reach provided by TIPS.