The functioning of payment and settlement systems is important for maintaining the stability of the national economic and financial system, avoiding interruptions to the circulation of currency, and allowing monetary policy to be implemented smoothly. Private individuals, businesses and public sector institutions make their everyday payments and securities transfers through payment and settlement systems. Interruptions to the flow of payments can hinder the functioning of the entire economy, as happens if wages are not paid into accounts or if cards cannot be used for payment in shops.
Payment and settlement systems develop constantly to meet the expectations of users, and there were two major leaps forward at the start of the 21st century. The first was the change to the Single Euro Payments Area (SEPA) in 2014, which allowed people and companies to make payments in euros under the same conditions throughout the European Economic Area. This had only just come into being when the idea of instant payments started to be talked about. These are payments where the payment order submitted by the client is executed immediately, meaning the money arrives in the receiving account within seconds. This does not depend in any way on the opening times or holidays of the banks. Development started on instant payment solutions in several places in Europe early in the 2010s, and RT1, operated by EBA Clearing, became the first instant payment system to come to the market in 2017.
The systems that are important for the Estonian economy are the card payment system, systems for everyday interbank payments, and the securities settlement system (see the Figure below). The card payment system, the securities settlement system and the STEP2 and RT1 payment systems are managed by private companies. Eesti Pank as a member of the European System of Central Banks (ESCB) manages the Estonian component of the TARGET2 payment system, which includes the TARGET instant payment system TIPS, and is a part owner of the securities settlement platform TARGET2-Securities together with other Eurosystem central banks. The three ESCB payment systems were brought together in 2018 under the single name TARGET Services.
Figure. Important payment and settlement systems for the banks operating in Estonia