Fifteen national systems plus the European Central Bank's payment mechanism form the largest payment system in Europe for the euro currency: TARGET, an acronym for Trans-European Automated Real-Time Gross Settlement Express Transfer, as reported by Susana Núñez, Director of Payment Systems at the Bank of Spain and responsible for the Spanish component of TARGET.
Since 1993, the process of unifying and standardizing European local payment systems has been underway. This aims to streamline operations and reduce liquidity risks in their daily functioning by introducing "real-time gross settlement payment systems." Thus, since 1997, the SLBE (Bank of Spain Settlement System) has operated as such for local payments, coexisting with other wholesale and retail systems, and whose final positions are settled through this system.
As regards cross-border payments, from 1999 onwards, with the introduction of the euro as the single currency, the duly adapted local systems of the 15 countries, together with that of the European Central Bank, are connected through the Interlinking system, giving rise to the current European TARGET payment system.
At the European Central Bank, only the central banks of each country and some international payment systems and organizations have accounts, while at the central banks of each country, all financial institutions are taken into account, so "the TARGET system is simple in its operation," says Susana Núñez, head of TARGET, "and at the same time it is the one that allows the widest access, since all European financial entities (around 40.000) and, through them, their clients, can access it."
The launch of TARGET for real-time payments has been the means to achieve several objectives, such as: implementing monetary policies, truly integrating European payment systems, promoting the effective implementation and use of the euro, increasing the security of European payment systems, etc. "To achieve these goals, TARGET could not operate in real time without the provision of liquidity and intraday funding (that is, for successive transactions throughout the day that must be settled at the end of the day), duly guaranteed, which central banks provide," says Susana Núñez.
In just a few years, TARGET has become "the simplest and most accessible cross-border payment system for any financial institution, which only needs to maintain an account with its Central Bank to operate and use TARGET," says the system manager, who adds: "In our case, the Bank of Spain has established, for years, direct communication systems with the financial institutions through whose mediation the operations are initiated or received.
"Given that it is an automated system," explains Susana Núñez, "the correct and complete identification of the beneficiary's account is required, that is, the IBAN code (International Bank Account Number); if the IBAN is correct, the payment is credited to the beneficiary's account automatically, which provides not only speed but also great security and absence of incidents."
The cross-border transaction fees in TARGET, which European Central Banks apply uniformly to financial institutions, range from 1,75 to 0,80 euros per transaction, depending on the monthly number; these prices are very reasonable for the services provided by the system.
TARGET is designed to serve wholesale transactions, both cross-border and domestic, but its scope is not limited to this and it is increasingly handling retail payments. In 2003, over 66,6 million transactions were processed through the TARGET system, 15,2 million of which were cross-border; the total value of transactions exceeded €420 billion. Individuals or legal entities wishing to receive their European payments more quickly in the beneficiary's account can request their financial institution to process payments through TARGET.
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