Businesses and individuals increasingly expect completely frictionless and immediate financial transactions, and streamlining cross-border euro transactions through dedicated networks is one of the keys to providing them with these experiences. If your payment services business is serving or looking to serve customers within the eurozone, consider CENTROlink as an optimal and easily accessible solution that will give you direct access to the Single Euro Payments Area (SEPA), the crucial facilitator of euro transactions, without the necessity to have commercial banks acting as intermediaries. It’s flexible, cost-effective, and completely secure.
What Is CENTROlink?
CENTROlink, managed by the Bank of Lithuania, serves as a strategically important retail payment system allowing businesses to join and use the SEPA network. By offering a wide range of SEPA scheme services, it functions as the infrastructure through which the Bank of Lithuania facilitates efficient technical access to SEPA for various payment service providers (PSPs). These include banks, specialized banks, credit unions, electronic money institutions (EMIs), and payment institutions (PIs) licensed within the European Economic Area (EEA).
Today, over 150 PSPs from 19 EEA countries use CENTROlink services which is clear proof that the system is effective and trustworthy. In 2022 alone, more than 276,3 mill. payments with a value of 476,7 bill. EUR were made through CENTROlink, a showcase of the system’s capabilities and scale.
For all the participating PSPs, CENTROlink solves a variety of problems:
- Slow and inefficient cross-border transactions
- The obligation of having to meet diverse regulatory standards and compliance requirements across multiple jurisdictions
- Limited availability of real-time payment options
- High fees associated with cross-border transactions
- Limited connectivity and interoperability with existing systems
- High credit and transactional risks
- Inefficient fund management and limited access to liquidity during critical business hours
PSPs engaging in cross-border transactions value that CENTROlink is designed to harmonize and integrate with various legal systems. It provides a flexible framework that adapts to the requirements of different jurisdictions while maintaining consistency and compliance at national and international levels. This means that regardless of where your customers are based, you can expect to adhere to international transaction regulations with ease while focusing on streamlining your cross-border transactions.
CENTROlink has been tested and improved over the years. It was introduced in 2015 and builds upon Lithuania’s pre-euro local currency payment system initiated back in 2004. While it’s exclusively owned by the Bank of Lithuania, its governing board comprises representatives from the three Baltic countries – Estonia, Latvia, and Lithuania. This structure encourages collaboration in the region, invites more diverse inputs and perspectives, as well as leads to more comprehensive decision-making that reflects the interests of multiple stakeholders looking to harmonize 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. Simply put, SEPA is an integrated market for electronic payments in the euro currency within the EEA which makes cross-border transactions within the eurozone as easy as domestic payments. SEPA payment scheme participants benefit from cheaper, faster, and more efficient payment transactions. It also allows payment businesses to optimize their operations by giving tools to standardize payment methods, formats, and procedures. While in many countries accessing SEPA requires involving commercial banks, Lithuania’s central bank offers CENTROlink as a direct way to connect to SEPA payments.
The Payment Systems CENTROlink Is Connected to
CENTROlink is connected to several key payment systems which are crucial for ensuring seamless transaction processing within the EEA. At no extra cost, participating PSPs can access such key European payment systems like 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). All of them can significantly propel your financial operations and provide a major competitive edge that attracts and retains millions of customers from across Europe.
Here’s how these systems are defined and what they will mean for your business:
- STEP2 is a prominent pan-European Automated Clearing House (ACH) infrastructure operated by EBA CLEARING, essential in supporting the exchange of low-value, high-volume euro payments between financial institutions within the SEPA and beyond
- RT1 is a pan-European instant payment system, enabling 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 valuable for any payment services business involved in international operations and cross-border transactions, including multinational corporations, and various startups expanding globally. Thanks to a wide variety of exceptionally advantageous features, it can become an integral part of your strategy for targeting millions of European customers. The system allows for customization based on the specific needs of businesses operating in diverse industries and regions which means you’ll have the flexibility in structuring your SEPA-related legal agreements and processes. At the same time, it simplifies international legal processes by providing standardized templates for contracts, agreements, and legal documentation across different jurisdictions.
The most notable benefits of CENTROlink:
- It adheres to SEPA Instant Payments procedures, even for standard transactions like SEPA credit transfers (SCTs) or SEPA direct debits (SDDs) which makes any transaction faster and more immediate
- The service is available 24/7/365 which is very advanced compared to the limited operating times of such payment processing systems as EMZ operated by the German Bundesbank
- PSPs can achieve autonomy from intermediaries by establishing IBAN accounts within their own systems, enabling them to independently initiate payments
- It offers a platform for quick and efficient dispute resolution through arbitration and mediation
- There are no limits on payment values, the number of payments, or the creation of IBAN accounts
- Payments are made using accounts opened with the central bank which is why there is no credit risk involved
- The system gives the opportunity to establish customer deposit accounts and maintain higher funds than necessary for transactions which offers PSPs increased flexibility and potential to improve financial planning and strategically utilize available resources
- CENTROlink provides access to automated liquidity management within the Eurosystem’s TARGET2 business hours which allows PSPs to efficiently manage their available funds and optimize cash flow
- Due to its dual infrastructure model, the system guarantees uninterrupted operations, even in critical circumstances, and enables PSPs to ensure smooth transaction processing and operational stability regardless of system disruptions
- PSPs have several connectivity options, including a secure internet connection which allows PSPs to choose the most suitable and secure method for connecting to CENTROlink based on their infrastructure and security requirements
- 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 considerable heap of benefits continues to attract increasing numbers of European payment service providers. According to the Bank of Lithuania, in 2022, the usage of the CENTROlink payment system surged, with a 1,5-fold increase in overall payments, more than a doubling in instant payments, and a one-third increase in the total payment value. To further grow the CENTROlink user base and respond to market demands, the authority continues to innovate. For instance, it’s currently exploring the potential addition of a request-to-pay feature. This feature would offer the convenience of real-time options to confirm, postpone, or decline payments for services rendered, goods bought, and other transactions directly from one’s account.
Joining CENTROlink means signing up to benefit from a fairly priced payment infrastructure. The Bank of Lithuania offers a straightforward and transparent fee system with rates that are competitive within the industry which can contribute to the reduction of your operational expenses. The joining fee is 2,000 EUR and if you want to join an additional SEPA scheme, it will cost 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 essentially vary depending on the type and monthly volume of transactions.
How to Join CENTROlink?
The process of joining CENTROlink is designed to ensure compliance of PSPs within the EEA, operational efficiency, and frictionless integration. Prepare yourself for taking a number of legal and technical steps before being given the green light to go live in this system. Our team of experienced lawyers can help you ensure that the entire process is streamlined, compliant, and with minimal risks.
To connect to the CENTROlink payment system, you need to take the following steps:
- Attend an introductory meeting with the CENTROlink representatives, where you’ll present your PSP’s business model and company needs, as well as discuss potential business relationship
- Complete the know-your-customer (KYC) questionnaire and prepare supporting documents
- Submit the questionnaire and all the required documentation to the Bank of Lithuania
- Once your submission is assessed and deemed successful, sign a non-disclosure agreement (NDA) with the Bank of Lithuania which will grant you access to CENTROlink technical documentation
- Submit a request to connect to the CENTROlink system
- Sign the certification agreement to receive a CENTROlink access certificate
- Register your PSP business in CENTROlink and external payment system testing environments
- Perform testing procedures, and submit a testing report to the Bank of Lithuania
- Update KYC documentation accordingly, and sign the CENTROlink participation agreement with the Bank of Lithuania
- Register your PSP business in payment systems for the agreed go-live date
The onboarding process is adaptable and flexible as the Bank of Lithuania is considerate of the unique preparedness of each PSP. This tailored approach will allow you to navigate the integration process at your own pace, ensuring a smoother transition and alignment with your business’s specific operational efficiency. You can effectively collaborate with CENTROlink’s support team to develop a personalized integration plan that should outline timelines, technical requirements, and necessary resources for uninterrupted integration.
Eligibility Criteria to Join CENTROlink
If you wish to apply for connection to CENTROlink, your payment services business will have to meet specific requirements set out by the Bank of Lithuania. The authority aims to ensure that the payment system is used only by trusted financial market participants and, therefore, assesses each application for connectivity meticulously, evaluating the legitimacy and credibility of each applicant to safeguard against potential risks and maintain the system’s integrity and trustworthiness. To avoid rejection or being disconnected after being granted access, you should seek legal assistance from our dedicated team here at Regulated United Europe who will support you in meeting the eligibility criteria and maintaining ongoing compliance.
Key eligibility criteria for connecting to CENTROlink:
- Possess the necessary financial license or authorization within the EEA or SEPA
- Demonstrate at least basic operational readiness to integrate with the CENTROlink system, including the technical infrastructure and capabilities to effectively utilize the platform’s functionalities
- Prove legitimate intentions for utilizing CENTROlink for cross-border transactions or payments within the EEA by participating in KYC and risk assessment processes
- Demonstrate good standing and a reputable track record within the financial industry, ensuring reliability and trustworthiness in utilizing the payment system
CENTROlink is open to all PSPs meeting the eligibility criteria. Whether you’re representing a bank, specialized bank, credit union, EMI, or PI licensed within the EEA, you have an opportunity to connect your business to this game-changing infrastructure and considerably improve operational efficiency. Seizing the chance to integrate CENTROlink into your workflows now means accelerating your growth on a European and global scale. The sooner you connect, the sooner you’ll start reaping the benefits of streamlined cross-border euro transactions.
If you wish to implement CENTROlink payments system into your company’s operations, our team here at Regulated United Europe will be delighted to support you in ensuring that your company fully complies with the relevant eligibility criteria and overall SEPA requirements. If you haven’t obtained the necessary fintech license within the EEA yet, we can guide you through the license application process or lead the acquisition of a ready-made company with a fully functioning license. Whichever stage you’re at, our experienced lawyers, business development professionals, and financial accountants will have your back. Contact us now to schedule a personalized consultation and set the stage for exponential success.
FREQUENTLY ASKED QUESTIONS
CENTROlink is a retail payment system managed by the Bank of Lithuania. It provides direct access to the Single Euro Payments Area (SEPA), offering a flexible, cost-effective, and secure solution for businesses involved in euro transactions.
CENTROlink addresses issues such as slow cross-border transactions, diverse regulatory standards, limited real-time payment options, high fees, limited connectivity, and credit and transactional risks.
CENTROlink was introduced in 2015, building upon Lithuania's pre-euro local currency payment system initiated in 2004. It has been continuously tested and improved, with the latest innovations including a potential request-to-pay feature.
SEPA, or the Single Euro Payments Area, is an integrated market for electronic payments in the euro currency within the EEA. CENTROlink connects businesses directly to SEPA, making cross-border transactions within the eurozone as seamless as domestic payments.
CENTROlink is connected to key payment systems like STEP2, RT1, TIPS, and TARGET2.
These systems support low-value, high-volume payments, instant payments, settlement services, and large-value euro transactions.
CENTROlink offers advantages such as:
- Adherence to SEPA Instant Payments procedures
- 24/7 availability
- Autonomy from intermediaries
- Efficient dispute resolution
- No limits on payment values
- Access to automated liquidity management
How does CENTROlink contribute to operational flexibility and financial planning for payment service providers?
CENTROlink allows payment service providers to establish customer deposit accounts, maintain higher funds than necessary, and access automated liquidity management within the Eurosystem's TARGET2 business hours, enhancing operational flexibility and financial planning.
What is the pricing structure for joining CENTROlink, and how competitive are the rates within the industry?
Joining CENTROlink involves a straightforward fee system, with competitive rates within the industry. The joining fee is 2,000 EUR, with additional costs for joining an extra SEPA scheme and transaction fees based on type and volume.
The onboarding process involves:
- Attending an introductory meeting
- Completing a KYC questionnaire
- Submitting required documents
- Signing an NDA
- Connecting to the CENTROlink system
- Performing testing procedures
- Signing the participation agreement
To join CENTROlink, payment service businesses must possess a financial license or authorization within the EEA or SEPA, demonstrate operational readiness, participate in KYC and risk assessment processes, and have a reputable track record in the financial industry.
How can CENTROlink be integrated into payment services businesses' operations, and what support is available during this process?
CENTROlink's integration process is adaptable and flexible.
Businesses can collaborate with CENTROlink's support team to develop a personalized integration plan, ensuring a smooth transition aligned with specific operational efficiency goals.
How does CENTROlink address the challenges associated with cross-border transactions within the Eurozone?
CENTROlink addresses challenges by:
- Harmonizing and integrating with legal systems;
- Providing a flexible framework adaptable to different jurisdictions;
- Ensuring consistency and compliance at national and international levels.
Can businesses utilizing CENTROlink initiate real-time payments based on the mobile phone number of a payee?
Yes, participating businesses can connect to the Bank of Lithuania's Proxy Lookup Service through CENTROlink, allowing them to initiate instant payments based on the mobile phone number of a payee. This process leads to a simplified payment process and improved user experience.
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