In accordance with the requirements of the SCT Inst scheme, TIPS operates 24 hours a day, seven days a week and 365 days a year, including on official TARGET2 holidays.
Funds made available for the settlement of instant payments are left on TIPS accounts even when TARGET2 is closed so that operations can continue smoothly.
TARGET2 business days are authoritative for TIPS – that is to say, one business day ends and the next one begins shortly after 18:00, Monday to Friday.
TIPS settles instant payments according to the requirements formulated by the European Payments Council (EPC) in the SEPA Instant Credit Transfer (SCT Inst) scheme.
Thus, an SCT Inst payment should have an end-to-end processing time between scheme participants of ten seconds or less. This time begins when the originator’s payment service provider applies a time stamp as soon as it has completed all the necessary checks and blocked the amount to be transferred on the originator’s account.
When TIPS receives an SCT Inst payment transaction message, the amount to be transferred is blocked on the TIPS account of the participant sending the payment and the message is forwarded to the payment service provider receiving the payment for acceptance. This receiving participant sends either a positive or a negative reply. If the reply is positive, TIPS will perform settlement; if it is negative, the blocked amount is released again. In both cases, the sending participant will be notified about the successful or failed transaction. Once the beneficiary’s payment service provider has received confirmation from TIPS, it can make the transferred amount available to the beneficiary.
TIPS works on a transaction-by-transaction basis – i.e. each payment is processed and settled individually. By their very nature, instant payments need to be settled immediately or almost immediately, so transactions should not be queued or held for later processing. This is why transactions are immediately rejected if there is insufficient cover on the TIPS account to be debited. Payments cannot be prioritised – transactions are processed in the order in which the system received them.
Payment messages under the SCT Inst scheme are based on the ISO 20022 standard. TIPS also uses XML format for messages which are not prescribed by the scheme (e.g. liquidity transfers and notifications).
The addressing of TIPS payments is supported by a TIPS directory, which lists all the BICs which can be addressed via TIPS.
TIPS uses TIPS Dedicated Cash Accounts (or TIPS-DCAs for short) to settle instant payments. These accounts are operated on a credit basis in TIPS and can be supplied with liquidity from any PM account operated in TARGET2. Transfers of credit balances in both directions – i.e. from a PM account to a TIPS-DCA and vice versa – can be instructed in either U2A mode (using the graphical user interfaces) or A2A mode.
Liquidity can only be transferred during TARGET2 opening hours. Outside these hours, credit balances provided for the settlement of instant payments will remain on the TIPS accounts so that operations can continue smoothly. In other words, they are not automatically transferred back to the PM account at the end of the business day.
Furthermore, TIPS accounts can be provided with liquidity through incoming instant payments.
Liquidity management links (or LM links for short) between TIPS-DCAs and PM accounts make it as convenient as possible for participants to incorporate TIPS accounts into their TARGET2 liquidity management operations. Using these links, participants can shift credit balances in either direction between the linked accounts using the Information and Control Module (ICM) in TARGET2. As many as ten TIPS-DCAs can be linked to one PM account using LM links. The aggregate credit balance on all the linked TIPS-DCAs is shown in the liquidity overview for the PM account in the TARGET2 ICM.
Holders of TIPS accounts can set floor and ceiling amounts so that they are notified whenever the account balance exceeds or falls below a certain level. If other institutions or branches are set up as reachable parties (see the “Participants” navigation item), account holders can restrict the use of the TIPS account by setting individual limits.
Another link – an RM/SF link (short for reserve management/standing facilities) – is used to allocate the credit balances on a TIPS-DCA to a monetary policy counterparty in the Eurosystem and, at the end of every TARGET2 business day, enables them to be counted towards compliance with the minimum reserve requirement and when making recourse to automated overnight credit. Any excess reserves are taken into account when calculating the fees for the holding of credit balances (“negative interest”). To set up this link, both the PM account (or HAM account) and the linked TIPS-DCA must be held with the same central bank. An RM/SF link can be set up independently of an LM link, but both are mandatory.
Technical access to TIPS is facilitated via the Eurosystem Single Market Infrastructure Gateway (ESMIG). The ESMIG provides a single access point for directly connected actors to access TARGET Services. Access to the ESMIG is provided by the two Network Service Providers (NSP) selected by the Eurosystem, which are SIA-COLT and SWIFT.
Due to the tight time requirements for SCT Inst payments, payments can only be exchanged on an automated basis, i.e. in application-to-application mode (A2A). There is also a graphical user interface for liquidity and reference data management as well as for queries about individual payments (user-to-application mode – U2A).
Reference data for TIPS are recorded and maintained mainly in CRDM, the Common Reference Data Management system. Like ESMIG, this component forms part of the Eurosystem’s consolidation project; after its completion, all reference data used jointly by TARGET services are to be held in CRDM. For TIPS, a preliminary stage of this shared component was implemented.
The vast majority of reference data for TIPS is collected via the CRDM graphical user interface (CRDM GUI). Owing to the technical design of CRDM as an extension of the current T2S static data module, it is possible to input and modify data in CRDM during T2S operating hours, i.e. around the clock on T2S business days with the exception of the maintenance window between 03:00 and 05:00. Before the change of the business day, at around 17:00, the reference data valid for the following business day are transferred from CRDM to TIPS.
Since instant payments can be settled in TIPS around the clock, it must be possible to modify some reference data at any time – even on weekends and public holidays. This category includes, for example, adjusting limits or blocking accounts. To facilitate this, such reference data are maintained directly in TIPS instead of CRDM, and can thus be modified 24/7.
Upon opening a TIPS account, the reference data are input by the National Service Desk for TARGET services on the basis of the forms submitted. Any additional entries (e.g. creating users and assigning roles) must be made by the participants themselves, which is why each participant needs U2A access.