For instance, in e-commerce, online payment systems often issue payment guarantees to vendors, who can send the goods to their customers, knowing that the funds will be paid to their account even though the transactions have not been finalized. This is how payment solutions like PayPal or eps online transfers work.
Over the past several years, a number of countries have launched real-time retail payment systems. They can be used for the final transfer of funds within a few seconds. Some Asian economies have played a pioneering role here. India, for instance, launched a real-time interbank clearing service as early as 2010. The ultimate goal is to make India a cashless economy.
Mexico has also taken a leading role in this field, as 24/7 instant payments have become the norm in the business sphere. The country’s large-value payment system SPEI has allowed the transfer of peso funds within five seconds since December 2017. SPEI is available around the clock. In addition, Mexico’s CoDi platform was launched to establish instant payments at the point of sale and in e-commerce. CoDi relies on QR code-based, in-app payments that are settled immediately via SPEI. The system was launched in the 3rd quarter of 2019, but has remained below expectations.
Looking at Europe, the European Payments Council (EPC) published a European standard for SEPA instant payments (SEPA Instant Credit Transfer – SCT Inst) in November 2017. At the same time, EBA CLEARING launched an instant payment system called RT1. In RT1, euro transactions up to EUR 100,000 can be transferred between payment accounts within ten seconds. Most transactions are completed in less than three seconds.
Spain and the Netherlands are the most advanced European countries in terms of instant payments. The Netherlands launched a national instant payment system in 2019. It has no amount limit, is available 24/7 and processes transactions within five seconds.
TARGET2 is the real-time gross settlement system owned and operated by the Eurosystem. Its predecessor TARGET has processed large-value transactions in central bank money between banks in real time since 1999. TARGET is not available for retail payments, though.
In 2019, the European Central Bank launched the infrastructure service TIPS (Target Instant Payments Settlement) for the settlement of SEPA instant payments.
All that is required for the successful settlement of SEPA instant payments is that the intended recipient bank can be reached within TIPS. All banks operating in the EU are required to ensure TIPS reachability by November 2021. The service is available 24/7/365.