Treasury teams frustrated by complexity in cross-border payments see reason for optimism as the ‘P27’ clearinghouse moves ahead.
Nordic countries are on the cutting edge of digitizing their economies by embracing new technologies and creating near-cashless societies. But until recently, they had ignored the myriad legacy technologies supporting cross-border payments systems that NeuGroup members say are needlessly complex. Sending money from one nation to another requires jumping through too many hoops, with each country using its own currency and payment infrastructure.
- Now, though, to the delight of treasurers and their bankers who crave simplicity, that’s changing—an exciting development rooted in an initiative with a relatively bland name: P27. It’s a reference to the 27 million inhabitants of the Nordic region, which collectively form the 12th largest economy in the world.
- At a recent meeting of NeuGroup for European Treasury, members said they are keeping a hopeful eye on P27, which is backed by banks and governments of Sweden, Denmark and Finland. It promises to establish a single clearinghouse to process all payments within the region.
- “This is a way for the Nordic countries to build one payment infrastructure in one ecosystem to deal with all account-to-account payments in the euro [for EU member Finland], the Swedish krona and the Danish krone,” P27 Nordic Payments chief strategy officer Martin Georgzén told NeuGroup Insights.
Rolling out. After a few delays, the project secured its last approvals in 2021, and is scheduled to launch a service for Swedish mobile payments this year. Mr. Georgzén said the objective of the company, which is owned by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank, is for “the biggest banks in each of these countries to develop one platform to take care of instant payments and batch payments, and also close down all old systems at the same time.”
- The platform’s standards are aligned with SEPA, the EU’s payments system that Finland-based accounts can already use to make payments to accounts in the EU. This will mean that Denmark and Sweden will be in sync with SEPA’s standards for files and other protocols.
- Though Norway helped lay the groundwork for P27, the nation withdrew from the project in 2019, and will continue to rely on its own clearing system, NICS.
“An enormous project.” The mechanics of the project will require all banks in the three nations to change their connections, customer by customer, account by account, one solution at a time. “And this all needs to happen at about the same time,” Mr. Georgzén said. “We are quite far in this work and we intend to start with the mobile wallet payments in Sweden later this year, and migrating from old accounts early in 2023,” he continued.
- Following the completion of the project in Sweden, Mr. Georgzén said P27 will continue “currency-by-currency, system-by-system until we migrate fully to the new platform. When you think about this, this is an enormous project.”
- The company has released no other information about the timeline of the service’s rollout.
Building atop payment infrastructure. Once the standardized payment platform is implemented and all accounts in the three nations are, ideally, on an even playing field, Mr. Georgzén said he believes there will be a great deal of opportunity to innovate on top of the platform.
- Following the initial rollout, P27 envisions a second layer on top of the single clearing platform, in which users could opt into using tools offered by the company for fraud management and digital invoicing, among other applications (see chart).
- Standardizing payments would also create a broader base for fintechs to build a third layer, offering unique solutions that could be adopted by any user in Denmark, Sweden or Finland.
- “Think of it like the internet,” Mr. Georgzén said. “Banks can build, fintechs can build, anyone can build on top of the solution,” he said. “You need a solid base, and that’s what we can create.”