Piero Cipollone: TIPS (TARGET Instant Payment Settlement) - the
new Eurosystem market infrastructure service - Banca d'Italia as
service provider and manager of the business relationships with
the financial community
Welcoming remarks by Mr Piero Cipollone, Deputy Governor of the Bank of Italy, at TIPS
Webinar, Bank of Italy, 12 July 2021.
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It is a great pleasure to welcome you here today to this seminar on TARGET Instant Payment
Settlement (TIPS), the Eurosystem market infrastructure for the settlement of instant payments
in central bank money. The seminar will illustrate the architecture and functioning of the platform
developed by the Bank of Italy on behalf of the Eurosystem, and its contribution to retail payments
market innovation in Europe.
TIPS was launched in 2018 and allows transactions to be settled in central bank money across
Europe within seconds. In launching TIPS, the Eurosystem acknowledged that the capacity to
transfer funds in a matter of seconds is a powerful one, and has great potential with respect to
traditional credit transfers.
The implementation of the system was carried out by the 4CBs - the central banks of France,
Germany, Italy and Spain, which are the providers of the Eurosystem Market Infrastructures. The
Bank of Italy, in particular, was responsible for developing the service and it was also entrusted
with the task of operating the platform.
From the 4CBs' perspective, TIPS represents a break with the past as well as increasing
awareness of the fact that digitalization is blurring the lines between wholesale and retail. Before
TIPS, Eurosystem projects such as TARGET2 and TARGET2-Securities (T2S) were designed
to promote integration and harmonization of market infrastructures within the euro area, meeting
the needs of financial market operators, depositories and large custodian banks. With TIPS, the
Eurosystem has provided the European financial community with an infrastructure designed to
support the provision of innovative, customer-friendly retail payment solutions for the benefit of
European citizens. In fact, TIPS was developed with the aim of fostering the integration of retail
payment services and of eliminating barriers due to a lack of interoperability between different
settlement platforms based on the SEPA Instant Credit Transfer (SCT Inst) Scheme - i.e. the
standard TIPS (TARGET Instant Payment Settlement) - the new Eurosystem market
infrastructure service: Banca d'Italia as service provider and manager of the business
relationships with the financial community Welcoming remarks by Piero Cipollone Deputy
Governor of the Bank of Italy TIPS Webinar Bank of Italy 12-13 July 20212 for pan-European
instant payments developed by the European Payments Council at the request of the Euro Retail
Payments Board.
Building TIPS required the fulfilment of a number of particularly challenging technical
requirements:
- virtually instant payment execution (with processing times per payment not exceeding 5
seconds);
- the capacity to handle a large volume of processed payments (over 43 million transactions per
day); - very high availability and resilience (reaching 99.9% service availability, and the capacity
to restart within 15 minutes in a site disaster scenario);
- extreme scalability of the system from a performance viewpoint (the ability to sustain a doubling
of the volume of payments over a year).
As Governor Visco recently said, what makes TIPS really unique and unlike any other settlement
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platform is its distributed architecture in all layers, from application to infrastructure. This
architecture is based on 'industry standard' and open-source software. The design is meant to
ensure very high levels of stability that make service interruptions and software bugs very
unlikely. The strengths of this powerful platform lie in its ability to process millions of transactions
per day, requiring just a few seconds for each one, and operating all year round with an
extremely low environmental impact.
The presence of redundant servers allows the settlement engine to process payments without
storing any information. This avoids the creation of 'bottlenecks' in the processing flow and
enables TIPS to be very fast and to achieve system resilience. It is worth emphasizing that this
architecture differs from distributed-ledger systems (such as the Bitcoin network, based on a
block chain) which need to generate trust and consensus among a distributed community by
means of an expensive and energy-intensive global validation process. In the case of TIPS, the
recognition and guarantee of the transactions comes from the trust provided by the Eurosystem
(a typical task for a central bank).
This also allows TIPS to be 'green'. As shown in recent research carried out by the ICT
Operations Directorate of the Bank of Italy, the TIPS carbon footprint in 2019 was almost 40,000
times smaller than the amount of CO2 emitted by other distributed-ledger-based networks such
2
as Bitcoin. This is because, absent the need to generate trust and consensus among all the
network participants, there is no energy dissipation.
Due to its characteristics, this infrastructure has great potential.
Although TIPS was primarily designed for instant payment settlement in euros, it is a
multicurrency system. This feature means that the Eurosystem does not only aspire to provide yet
another market infrastructure, but also has the ambition of supporting the market by promoting
closer cooperation, including with non-euro central banks. Indeed, TIPS is currently attracting
considerable interest in the international community of central banks.
In April 2020, the Riksbank concluded an agreement with the Eurosystem to use the TIPS
technical platform for the settlement of instant payments in Swedish krona as of May 2022, and
is currently working with the Bank of Italy and the ECB to implement the so-called RIX-INST
instant payment service. The phase of the project currently under way was preceded by another
phase of gap analysis that permitted the identification of all functional enhancements required to
allow Riksbank to access the TIPS platform. The most notable outcomes of this gap analysis
activity were the definition of a new settlement model, alternative to the one defined on the basis
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of the SCT Inst scheme and called Single Instructing Party.
The upcoming onboarding of the Swedish banking community gave rise to the idea of exploiting
the common instant payment infrastructure in order to provide a cross-currency solution for
instant payments. This solution will initially involve only the euro and krona communities but, in
the near future, it will of course be available for all other currencies joining TIPS. Indeed, the
agreement concluded with Riksbank last April can represent a starting point for broader
initiatives, which may ultimately result in interconnecting other currencies and other currency
areas. The Danish krone is the next in line. Indeed, Danmarks Nationalbank has expressed
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interest in joining TIPS by November 2025. The connection to TIPS will allow Danish banks and
providers of payment services to settle payments in both currencies within seconds.
Enabling the TIPS platform to process cross-currency instant payments is a response to the
burgeoning consumer and business needs arising from the growth of cross-border e-commerce,
tourism and migration flows, and must be read as part of the broader G20 initiative to address
the key challenges often faced by cross-border payments. In October 2020, the G20 endorsed a
roadmap describing the necessary elements of a response to these challenges, in the form of a
set of 19 building blocks. One of the building blocks (number 13) seeks to enhance the existing
payments ecosystem by pursuing interlinking of payment systems for cross-border payments. In
this regard, the Bank of Italy is conducting a feasibility study for interlinking TIPS with Buna IPS,
the cross-border and multi-currency payment system owned by the Arab Monetary Fund. The
findings of the feasibility study should pave the way for a deeper level of cooperation with
noneuro central banks.
Cross-border payments is not the only area where digitalization is posing challenges. The safety
of central bank money and changing consumer attitudes to digital means of payment is another.
To ensure that consumers continue to have unfettered access to central bank money in a way
that meets their needs in the digital age, the ECB decided to advance work on the possible
issuance of a digital euro and started a preliminary analysis of potential solutions for the technical
implementation of a central bank digital currency (CBDC) from the perspective of the
Eurosystem. In this context, the Bank of Italy is currently cooperating with the ECB and the
euroarea national central banks to assess the potential of TIPS as a possible technical solution for a
digital euro. Indeed, with its speed, cost-efficiency and high scalability, TIPS is best placed to
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meet the basic requirements laid down by the Eurosystem for a digital euro, allowing the
processing of one billion transactions per day and the management of hundreds of millions of
accounts.
Important innovations are under way in TIPS. The ECB and the Bank of Italy are in the process of
developing a roadmap to upgrade TIPS from an evolutional, operational resilience, and financial
perspective. The roadmap will identify priority action areas and set objectives, balancing the need
to enable TIPS to handle new business cases and to ensure its operational resilience, also in
view of the increase in the volume of transactions as a result of the reachability measures'
implementation.
* * *
By way of conclusion, please allow me to express my gratitude to all the Bank of Italy and ECB
colleagues who will make contributions to this seminar, and who will share their knowledge and
experience with you.
I am sure that this exchange of information will prove extremely useful for understanding the
complexity of the current transformation of the payment industry but also just how committed the
Eurosystem is to supporting the digitalization of the European economy and to actively
encouraging innovation in retail payments.
Once again, let me extend our welcome to everyone who has joined us here today. I wish you a
very successful seminar.
1
See I. Visco, The role of TIPS for the future payments landscape, presentation at the virtual conference 'Future of
Payments in Europe', Deutsche Bundesbank, November 2020.
2
See P. Tiberi, 'The Carbon Footprint of the Target Instant Payment Settlement (TIPS) System: A Comparative
Analysis with Bitcoin', Bank of Italy, May 2021.
3
For a general overview of the SIP model, see the document 'Explainer on SIP settlement model' from the
European Central Bank's website, on the TIPS page.
4
See European Central Bank, 'Denmark to join Eurosystem's TARGET services', press release (MIP news),
Frankfurt, December 2020.
5
See ECB, Report on a Digital Euro, Frankfurt, October 2020