EU seeking accelerated adoption of TIPS
by Graham Buck
The European Commission (EC) is reported to be examining ways to encourage more banks to use its TARGET instant payment settlement (TIPS) system, which was launched last November.
TIPS is designed to enable people and companies to transfer euros to each other in seconds and potentially poses a challenge to payment companies and technology players such as PayPal. However, Reuters reports that slow adoption by banks so far of TIPS has spurred the EC to review ways of accelerating momentum.
“We are reflecting on whether a stronger regulatory push would be needed to speed up this process,” the EU Commission’s vice president for financial services and former prime minister of Latvia, Valdis Dombrovskis told a fintech conference in Brussels, according to Reuters.
He said the system has the potential to disrupt the existing payment services. “In a few years, we want Europe to set new global standards for instant payments technology,” Dombrovskis said.
Limited impact
The TIPS system enables near real-time payments to be made around the clock through smartphones, personal computers and in-store payment points.
It is currently available for consumers and businesses across 19 states in the eurozone but has made only a limited impact on a European payment services market dominated by PayPal, Google, Facebook, Amazon, Alibaba, and Tencent.
Swift described its integration with TIPS as a step into the future, providing a pivotal building block for access to the future planned Eurosystem Single Market Infrastructure Gateway (ESMIG).
At the time Marc Boyle, a director at the European Central Bank (ECB), also welcomed the launch as an important moment for the financial future of Europe.
“The go-live of TIPS…is a further landmark in the Eurosystem’s creation of a truly domestic market for payments and securities settlement in Europe,” he said. “We are pleased that Swift supports the integration of the European payments market as one of the network service providers of TIPS.”
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It is probably worth mentioning that TIPS, at least at the moment, does not offer any benefits for “end” customers compared to SEPA Instant Payments, which were introduced earlier (the settlement process is different, but that does not really matter to payers and beneficiaries).
Most banks are probably focussed on implementing SCT Inst and will only look at the competitor from ECB at a later stage. Obviously, the ECB could accelerate adoption by offering a wider service, which would basically be higher transaction amounts. But that would cannibalise and probably end the use of the basic TARGET2 RTGS service, which is more expensive and (theoretically) takes longer for a payment.
Anyhow, I fail to see how a regulatory push would be justified. All banks within the EUR area have to be able to at least receive instant payments already and all relevant banks will likely soon (within the next 2 years) offer one of both pan-European EUR instant payment services, let alone some of the national schemes.
So what push would this be? Forcing banks to offer instant payment across the EUR zone (or EU/EEA wide)? Not needed, this is almost here. Forcing banks to offer the ECB service even if they already offer the competitor service SCT Inst from EBA? That would actually be an anti-competitive regulation not in line with generic EU policies.