ECB Announces a New Blockchain Challenger for Instant Payments

The Blockchain technology that supports the operations of virtual digital currencies is considered revolutionary in a way that it allows for instant payments transactions across the globe at a very reduced cost. Although many banks and other financial institutions have remained critical about the existence of cryptocurrencies, they have lauded the underlying blockchain technology several times.

Many banks and money-transfer companies are also testing different blockchain solutions to replace the existing system thereby offering its customers better, faster and secured infrastructure for making instant payments. However, just when we are seeing the blockchain technology making inroads in the global financial system, an Executive Board Member of the European Central Bank - Yves Mersch said that he is working along with other ECB members on a new payments system dubbed Target Instant Payment Settlement, or TIPS, which is expected to go live by November this year.

Mr. Mersch claims the new TIPS system to be far better than the Blockchain which will deliver real-time payment transactions and will disrupt the existing Distributed Ledger Technology (DLT) and digital coins.

In an interview with Bloomberg earlier this month, Mr. Mersch said: “TIPS is 10 seconds, 0.2 cents. DLT transactions are at best 30 euros and take at least one hour. We have a mandate for efficient payment systems, and we go for efficiency. We are not bound to a technology, we are bound to results.”

The ECB members also had a discussion over another new settlement technology called as the TARGET Instant Payment Settlement which managed to garner more attention and fruitful inputs from the board members.

Mr. Mersch clearly hinted at the fact that ECB is more result-oriented than being technologically focused, and believes that it gives them an edge. However, he accepted that the policymakers were more involved than usual in the new technology due to a stiff competition posed by the blockchain technology.

While taking a further jibe at the DLT, Mr. Mersch said: “There are so many unsolved questions in terms of governance and legal certainty in DLT. We are looking to what extent we could overcome these legal barriers, but we are at a very early stage.”

Another iteration of the decentralized blockchain is certainly going to create a lot of curiosity in the global financial space. However, it will be too early to comment on anything at the moment as blockchain has already proved its mettle in the instant payments segment. Ultimately, one thing is sure that whether a better system arrives or not the end-consumer is certainly going to benefit a lot in the coming times.