TIPS: Europe finally gets its own payment system
The European Central Bank (ECB) launched the “Target Instant Payment Settlement service”, or TIPS, last November. This payment infrastructure enables consumers and companies in the eurozone to transfer money between bank accounts around the clock and in just a few seconds. Traditional money transfers take at least one day to complete, or a few days when requested over the weekend.
All you have to do is enter the IBAN or phone number of the recipient on the website or application of the bank where the account is domiciled. “As long as the sender has funds in their account, it’s as good as carrying cash”, says Marc Bayle de Jessé, Director General, Market Infrastructure & Payments at the ECB.
The ECB charges affiliated banks € 0.20 for the service. The banks choose whether to offer its customers the service for free or not. As a reminder, exchange fees charged to vendors for card payments are capped at 0.30% for credit cards and 0.20% for debit cards. According to a study conducted by the ECB, instant payments in Europe could reach 10 million transactions a day five years from now. By contrast, PayPal recorded over 20 million transactions a day in 2017 (7.6 billion in total). Eight banks in France, Spain and Germany have incorporated the ECB’s service.
This infrastructure meets the demand in Europe for e-commerce payment systems. The two leading payment card companies are American heavyweights Visa and Mastercard, and there are a number of new digital service providers such as Apple Pay or Google Wallet.
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