New ECB policy enables non-bank PSPs access to central bank payment systems

credit: Shutterstock
credit: Shutterstock

The European Central Bank (ECB) confirmed yesterday that non-banking Payment Service Providers (PSPs) will now be able to access central bank-operated payment systems. 

The move from the Eurosystem enables fintechs and neobanks in particular to access central bank payment systems, such as the ECB’s TARGET, which could see these non-banking firms streamline their payment processes even further. 

Non-bank PSPs and electronic money institutes (EMIs) will be defined under the Payment Services Directive and will fall in line with the Eurosystem’s Instant Payments Regulation, accommodating non-bank PSPs for the ECB’s instant payment rail TIPS

The ECB outlines that the inclusion of non-bank PSPs to meet the criteria for access to TIPS will start in April 2025, aiming to foster fresh competition and innovation of the European payment landscape as well as enhance instant payment adoption. 

Non-bank PSPs meeting certain requirements will be able to access TARGET, including T2 (for settling payments) and TIPS (for settling instant payments). The requirements will be set out in the TARGET guideline and will be the same as those that currently apply to credit institutions. 

The ECB will only grant non-bank PSPs who maintain relevant safeguards in place and “have demonstrated their ability to meet the operational and technical requirements already applicable to current participants”. 

Holding an account in a central bank payment system is intended to enable non-bank PSPs to place funds to meet their settlement obligations for a current business day. The balance on such accounts will be limited in size and should only include funds necessary to meet obligations, set out in the upcoming amendments to the TARGET guidelines. 

European national central banks that operate payment systems other than TARGET will develop terms and conditions to implement access by non-bank PSPs to their national payment systems in line with the principles outlined in the Eurosystem’s policy. 

The new policy will also be amended to fit the upcoming Payment Services Directive 3 (PSD3) to ensure that non-bank PSPs will safeguard users’ funds in an account held with a central bank. 

This latest move by the ECB and Eurosystem will no doubt be of great welcome to the likes of PayPal, Revolut, and many more non-bank PSPs to access a myriad of central bank payment rails across Europe. 

Non-bank PSPs have often used third-party rails from card payment networks. This move indicates that fintechs and neobanks throughout Europe will now be able to streamline their customers’ payments in a more efficient and secure manner.