In part two of our interview with Ledia Bregu, Director of Payment Systems, Accounting and Finance Department for the Bank of Albania (BoA), the conversation turned to AIPS EURO, a new payments infrastructure launched in 2022, Albania’s EU membership aspirations, progress on cross-border and instant payments, and of course, what a digital euro might mean for Albania. See here for part one of our interview with Ledia in last month’s issue.
Central Bank Payments News (CBPN): From our perspective, perhaps the most significant recent development in Albania is the settlement of domestic interbank transactions in euros. How did this project come about, and how does it serve the broader ambitions of the Bank of Albania?
Ledia Bregu (LB): The settlement of domestic euro transfers by the Bank of Albania is an initiative under the umbrella of the National Retail Payments Strategy and its implementation plan. First conceptualized by BoA in 2016, this project was based on an analysis of the domestic market for euro transactions that assessed the possibility of creating a national infrastructure capable of settling such transactions and tackling the costs to the economy (roughly ALL 718 million) and the informality1 of these transactions in the domestic market.
The Bank of Albania worked at an intensive pace in 2021 to finalize the implementation of the project, which went live successfully in January 2022 with all banks participating in the system. AIPS EURO settles all domestic transactions in euro for clients (individuals and businesses) with a real-time settlement feature, using the same module of the RTGS, and with drastically lower fees borne by the clients.
In terms of comparability prior to AIPS EURO, fees for sending a domestic transaction in euro ranged from 30 to 300 euros and fees for receiving payments in euro ranged from 20 to 200 euros. With the AIPS EURO now live, from January 2022 such transactions have a five-fold reduction in fees, ranging from a minimum of six euros to a maximum of 50 euros. Half of these fees (minimum of three, maximum 25 euros) are applied if sending euros within Albania electronically, while all fees for incoming transactions in euro through AIPS EURO are zero.
AIPS EURO has a clear impact on several economic factors. Most importantly, the considerable fees and commissions that once channeled through correspondent banks will remain in the domestic economy instead of flooding out of Albania. In this context, an estimated 10 million euros have been “saved” in fees during 2022 by all the traffic of domestic euro transactions channeled through AIPS EURO. A new infrastructure like AIPS EURO, in addition to reductions in cost and time, contributes to the payments ecosystem by safeguarding financial and monetary stability. The central bank is now equipped with all the necessary monitoring mechanisms available to this segment of the market, which were previously only partially monitored.
The Bank of Albania has regulated payments through AIPS EURO by using the same policy, differentiation of payments, and by capping commissions applied by banks to clients as it does for AIPS Lek. The main objective of this system and its regulation is to encourage the formalization of domestic euro payments in Albania and promote more efficient payment processes in euro for clients without jeopardizing the priority for payments in the national currency, as commissions and caps for such payments are cheaper.
Indirectly, this project also has an impact on ...
1 A recent IMF Article IV Consultation noted that the promotion of financial inclusion and electronic payments was important for reducing the informality in the Albanian economy.
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