Eurosystem sets policy on access by non-bank payment service providers to its central bank payment systems

19 July 2024

(The sixth paragraph of this news item was updated on 29 July 2024 to provide more information)

The Eurosystem has defined a harmonised policy to allow non-bank payment service providers (PSPs) to access central bank-operated payment systems, including TARGET. Non-bank PSPs include payment institutions (PIs) and electronic money institutions (EMIs), which are defined under the Payment Services Directive and the Electronic Money Directive respectively.

The new Eurosystem policy follows the enactment of the Instant Payments Regulation, which amended, inter alia, the Settlement Finality Directive to broaden the scope of entities eligible to participate in designated payment systems to include non-bank PSPs. The broader access criteria for TARGET are aimed at enhancing the efficiency of the European retail payments market, fostering competition and innovation in the European payments landscape, and supporting the uptake of instant payments in the European Union.

Starting in April 2025, 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. They will aim to ensure the smooth operation of T2 and TIPS by only granting access to non-bank PSPs which have the relevant safeguards in place and have demonstrated their ability to meet the operational and technical requirements already applicable to current participants. The change will come into effect through an amendment to the TARGET Guideline. This will be aligned with the implementation date of amendments to the Settlement Finality Directive and the Payment Services Directive at the national level.

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 the current business day. The balance on such accounts will therefore be limited in size and should only include funds necessary to meet such obligations. How the maximum balance will be determined will be set out in the amendment to the TARGET Guideline.

Euro area national central banks that operate payment systems other than TARGET Services will develop the 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 harmonised policy, taking into consideration, where needed, the different risk profile compared to TARGET.

In addition to amending the Settlement Finality Directive, the Instant Payments Regulation also amended the Payment Services Directive, introducing the option for non-bank PSPs to safeguard users’ funds in an account held with a central bank, subject to the discretion of that central bank. The possibility of safeguarding client funds at the central bank would be additional to the options currently available to non-bank PSPs. The Eurosystem will not provide accounts to non-bank PSPs for safeguarding users’ funds at central banks. The reasons that the Eurosystem will not provide safeguarding accounts are central bank specific, notably relating to monetary policy and financial stability. These do not apply to commercial banks. A related ECB Decision will follow in due course.

For more information and to start the application process, non-bank PSPs should contact their respective national central bank.