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 and Norges Bank are also preparing to onboard to TIPS, and Iceland has 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.
The TIPS privacy statement sets out how TIPs processes personal data in accordance with EU data protection rules.
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).