The new TIPS system will make instant payments more affordable for smaller banks
From today the commercial banks operating in Estonia will be able to join TIPS (TARGET Instant Payment Settlement) through Eesti Pank. TIPS is an instant payment system developed by the central banks of the euro area at the initiative of the European Central Bank. Like other pan-European instant payment systems, TIPS allows clients to settle payments in real time, night or day and throughout the year.
The two largest banks operating in Estonia, SEB Pank and Swedbank make their instant payments through the privately-funded pan-European instant payment system EBA Clearing RT1 as they themselves contributed to the development of that system. LHV Pank also contributed to the development of the RT1 system and will join it soon. SEB, Swedbank and LHV cover around 95% of inter-bank and intra-bank payments, or credit transfers, within Estonia, which could well soon start to happen to a large extent in real time and 24/7, 365 days a year.
Eesti Pank sees that smaller commercial banks could join through the TIPS system, as it may be more affordable for them given the competition in the market since the cost of one instant payment is fixed at 0.2 euro cents and there are no regular additional fees. Whichever instant payment system a bank uses, it will be possible to make instant payments between systems by using TIPS directly or through RT1, meaning SEPA instant payments will move between all the banks in Europe that have joined a system.
TIPS will allow smaller commercial banks to join the pan-European instant payment system on similar terms to those for large banks. This creates a level playing field, and in turn will encourage the provision of instant payments to everyone and every company in Estonia whichever bank they use.
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