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The European Central Bank (ECB) has announced plans to establish a bilateral link between the Eurosystem’s TARGET Instant Payment Settlement (TIPS) platform and India’s Unified Payments Interface (UPI), in a bid to improve global connectivity.
The Frankfurt-based central bank is ramping up its cross-border and cross-currency payment efforts as it looks to “foster a global payments ecosystem”.
It has said that it is keen to create a payments linkage with the UPI, a system developed by the National Payments Corporation of India and regulated by the Reserve Bank of India.
UPI has the largest instant payment transaction volumes in the world, with almost 400m transactions per day.
India is also among the top ten recipients of euro area remittances, and such a link could lead to more streamlined, efficient remittance payments between the two jurisdictions.
This initiative supports the G20’s global roadmap for faster, cheaper and more reliable cross-border payments, which the Financial Stability Board (FSB), overseeing the plan, recently criticised for its slow progress.
The Eurosystem plans to implement a cross-currency settlement service for its TIPS platform, utilising the European Payments Council’s One-Leg Out (OLO) Instant Credit Transfer (OCT Inst) scheme.
This service will facilitate the exchange of cross-border payments between TIPS and various global fast payment systems, and will also enable interactions with payment systems outside the euro area without requiring direct technical links.
Next steps
The initial phase will focus on the euro, the Swedish kronor and the Danish krone.
Erik Thedéen, governor of Sweden’s Riksbank, welcomed the move.
“It is very positive that we have now come so far that we will actually be able to provide a functional infrastructure for cross-currency payments.”
“The decision supports the global goals within the G20 to make cross-border payments cheaper, faster, and more secure. It is now up to the market to create the services that the general public demands,” he said.
The ECB also aims to join Project Nexus, a multilateral network of instant payment systems led by the Bank for International Settlements (BIS).
Connecting TIPS to Nexus could position it as a central hub for processing instant cross-border payments with the euro area.
Nexus, based at the BIS Innovation Hub in Singapore, will initially link fast payment systems from countries including Malaysia, the Philippines, Singapore, Thailand and India.
“If the exploration is successful, the Eurosystem would join the initiative,” the ECB says.
