CENTROlink

With the rise of Fintech, the trend is toward totally frictionless and immediate financial transactions by corporates and individuals. One of the keys to such experiences will be the facilitation of cross-border euro transactions on dedicated networks. If your payment services enterprise is serving or looking to serve customers within the eurozone, CENTROlink is one of the best and most accessible solutions that will grant you direct access to the Single Euro Payments Area-the crucial facilitator of euro transactions-without the need to have commercial banks act as an intermediary. It is flexible, cost-effective, and completely secure.

What Is CENTROlink?

The CENTROlink system, operated by the Bank of Lithuania, is a systemically important retail payment system allowing enterprises to connect and reach the SEPA network. It is highly versatile in offering an extensive range of SEPA scheme services, thus providing the channel through which the Bank of Lithuania ensures the most efficient technical access to SEPA for a wide array of PSPs. These include banks, specialized banks, credit unions, electronic money institutions (EMIs), and payment institutions licensed within the EEA.

Nowadays, more than 150 PSPs from 19 EEA countries make use of CENTROlink services. That fact is clear proof that the system is effective and reliable. During 2022 only, more than 276,3 mill. Payments with a value of 476,7 bill. EUR were made through CENTROlink, showing capabilities and magnitude of the system.

For all participating PSPs, CENTROlink solves a variety of problems:

• Various regulatory standards and compliance requirements at every level of the jurisdiction
• Non-availability of real-time payment options
• High fee structure for every cross-border transaction
• Lack of better connectivity and interoperability with their respective existing systems
• High credit and high transactional risks
• Ineffective fund management during critical hours of business for better access to liquidity

CENTROlink: For PSPs performing cross-border transactions, the fact that CENTROlink was conceived to harmonize and integrate under different legal systems is rewarding. It offers a flexible framework that is adaptive to the demands of various jurisdictions while maintaining consistency and compliance at both the national and international levels. This means you can rest assured that you will easily comply with all sorts of international transaction regulations, no matter where your customers are based, and can focus on smoothing out your cross-border transactions.

CENTROlink has undergone years of testing and refinement. It was introduced in 2015 and extends the previous Lithuania’s local currency payment system started back in 2004. Although it is exclusively owned by the Bank of Lithuania, representatives from the three Baltic countries, namely Estonia, Latvia, and Lithuania, make up its governing board. This framework promotes regional cooperation, opens the door to greater variety of inputs and insights, and results in richer decision-making processes that are representative of various stakeholders’ interests aimed at harmonizing eurozone transactions.

What Is SEPA?

If you haven’t had the chance to familiarize yourself with SEPA, you might be still wondering how CENTROlink is situated within the payment services ecosystem. In short, SEPA is an integrated market for electronic payments in the euro currency within the EEA; it as easily allows cross-border transactions within the eurozone just like domestic payments. Participants of the SEPA payment scheme benefit from cheaper, quicker, and more efficient payment transactions. It allows optimizing operations of paying businesses by granting tools to standardize the methods, formats, and procedures of making payments. While many countries allow access to SEPA only with the involvement of commercial banks, the central bank of Lithuania is granting direct access to SEPA payments through CENTROlink.

The Payment Systems CENTROlink Is Connected to

CENTROlink is connected to a number of key payment systems that play an important role in the provision of smooth transaction processing within the EEA area. Participating PSPs can avail of such key European payment systems as Short-Term European Paper-STEP2, Real Time 1-RT1, TARGET Instant Payment Settlement-TIPS, and Trans-European Automated Real-time Gross Settlement Express Transfer System-TARGET2 without any additional fee. Each of these will enormously drive your financial operations and provide enormous competitive advantage in acquiring and retaining millions of customers across Europe.

Here is how these systems are defined, and what they will mean for your business:

• STEP2: A pan-European Automated Clearing House (ACH) infrastructure, owned by EBA CLEARING, which is an integral part of the euro payment processing chain among financial institutions in the Single Euro Payments Area and beyond, for the low-value and high-volume payments.
• RT1: Real Time 1, pan-European instant payment system enables PSPs to offer real-time payment services to their customers.
• TIPS is an instant payment settlement service provided by the Eurosystem, allowing for the immediate settlement of payments in central bank money.
• TARGET2 is the real-time gross settlement (RTGS) system for processing large-value euro transactions between banks and financial institutions within the EU.

Advantages of CENTROlink

CENTROlink is beneficial for any payment services enterprise that participates in international operations and cross-border transactions, including multinational companies and a different range of startups that expand globally. With an extensive array of very favorable features, it can become the pivot of your strategy targeting millions of customers in Europe. The system enables personalization depending on the needs of companies active in multiple industries and locations, which in turn allows flexibility in how you set up your SEPA-related legal agreements and processes. While it does so, it also simplifies international legal procedures with standardized contract, agreement, and legal documentation templates for various jurisdictions.

Some of the key benefits of CENTROlink are as follows:

• It follows the procedures for SEPA Instant Payments, even for a standard transaction like SCTs or SDDs, and thus makes any transaction faster and more immediate. The service is available 24/7/365, which is highly advanced compared to the limited operating times such as those done by systems like the German Bundesbank-operated EMZ.
• Autonomy from any intermediary: PSPs can create IBAN accounts in their system and thus initiate payments independently.
• It provides a platform for arbitration and mediation-based dispute resolution in a fast and efficient manner.
• Without limitation of value and number of payments, it is also allowed to open as many IBAN accounts as required.
• Since the settlements are done through accounts opened with the central bank, there is no credit risk involved.
• The system lets one create customer deposit accounts and hold funds in excess of what might be required to cover transactions. This opens up more possibilities for PSPs to enhance their liquidity and better plan finances, using available funds more strategically.
• CENTROlink provides access to automated liquidity management within TARGET2 business hours of the Eurosystem and, therefore, allows for a more efficient use of available funds in support of optimized cash flow by PSPs.
• Due to the concept of a dual infrastructure, operation continuity is ensured even in critical circumstances, while for PSPs, it offers the possibility to ensure smooth transaction processing and operational stability regardless of system disruptions.
• It includes a number of connectivity options: an internet connection secured. PSPs may select the most appropriate and secured method from their infrastructure and security requirements to connect to the CENTROlink.
• Participating PSPs can connect to the Bank of Lithuania’s Proxy Lookup Service, allowing instant payments to be initiated based on the mobile phone number of a payee which simplifies the payment process for both the payer and the recipient and consequently improves user experience.
• All transactions are encrypted and adhere to robust security measures which means CENTROlink is a secure and reliable choice for your business.

This quite impressive pile of advantages is granting growing interest from more and more European payment service providers. According to the Bank of Lithuania, in 2022, more active use was made of the CENTROlink payment system: overall payments increased 1.5 times, instant payments more than doubled, and the total value of payments increased about one-third. The authority continuously innovates to further increase the number of users on CENTROlink and in response to the market’s demands. Recently, it has been investigating the possible addition of a request-to-pay facility. With the feature, it would be able to offer real-time options to confirm, delay, or decline payments for services provided, goods purchased, or any other transaction directly from one’s account.

CENTROlink Pricing

Joining CENTROlink means registration to take advantage of competitively priced payment infrastructure. The Bank of Lithuania offers easy and transparent pricing at competitive industry rates that can reduce your operational cost. The fee for joining is 2000 EUR while for every additional SEPA scheme you would like to join will be charged for an additional 1.000 EUR. The minimum monthly fee is 1,000 EUR. Transaction fees for executed SCT, SCT Inst, and SDD core transactions start from 0,01 EUR per transaction but in essence vary depending on the type and monthly volume of transactions.

How to connect to CENTROlink?

The CENTROlink onboarding process is designed to be compliant for PSPs across the EEA, operationally efficient, and frictionless. Be prepared to take a number of legal and technical steps before being greenlighted to go live in this system. Our various teams of experienced lawyers will guide you to make sure that this whole process will be streamlined and compliant, with minimum risk.

To connect to the CENTROlink payment system, the following activities need to be performed:

The adopted onboarding process is flexible, and the Bank of Lithuania considers peculiar preparedness from each PSP. This means that you will go through an integration process at a pace you will choose or that best suits your business, ensuring seamless transition and alignment with your particular operational efficiency. You can effectively collaborate with the support team of CENTROlink in developing a personalized integration plan that should outline timelines, technical requirements, and the resources needed for uninterruptible integration.

Eligibility Criteria to Join CENTROlink

In case you want to apply for connection to CENTROlink, your payment services business will have to meet certain criteria defined by the Bank of Lithuania. For this reason, the authority gives access to the system for payment only to reliable financial actors and, as such, carefully examines every application for connectivity with the aim of checking the adequacy and reputation of each applicant to ward off potential risks to protect integrity and trust in the system. In order not to face rejection or disconnection after being allowed to connect, you should consult our expert team here at Regulated United Europe who will help and guide you in meeting the eligibility requirements and observing continued compliance.
Eligibility criteria for connection to CENTROlink:

• Must hold an appropriate financial license or authorization in the EEA or SEPA.
• At least basic operational readiness to be integrated within the CENTROlink system by having adequate technical infrastructure and capacity to use the functions of the platform, as well as effective use of the platform itself.
• Legitimate interest in and intention to actually use CENTROlink for cross-border transactions or for EEA payments by undergoing the Know Your Customer process with a risk assessment.
• Good repute and good reputation within the financial community, sufficient to ensure reliability and trustworthiness in handling the Payment System.

Participation in CENTROlink is open to any PSP that meets the access criteria. Whether a bank, specialized bank, credit union, EMI, or PI licensed within the EEA, all have the opportunity to connect their business with this game-changing infrastructure and considerably win in operational efficiency. Seizing this opportunity today to integrate CENTROlink into your workflows means accelerating growth on a pan-European and global scale. The earlier you join, the sooner you will begin to enjoy the fruits of simplified cross-border euro transfers.

If you wish to bring the CENTROlink payments system into the activities of your firm, then our group here at Regulated United Europe will be very happy to serve you in such a way that your firm fully complies with the relevant eligibility criteria and general requirements of SEPA. If you haven’t acquired the required license in fintech in the EEA yet, we can take you through the licensure application procedure or lead the acquisition of a ready-made company with a fully functional license. Wherever you currently are in the process, our teams of experienced lawyers, business development professionals, and financial accountants will be there to back you up. To book in a private consultation, please contact us directly and make this the staging post to exponential success.