The Nordics’ P27 Initiative: Payments in Uncharted Waters
The advance of real-time payments around the world seems unstoppable, with 45 schemes currently live and a further 13 (at the time of writing) in the planning stages. In Europe, the Nordics’ P27 initiative – the world’s first integrated multi-country, multi-currency, real-time payments platform spanning Denmark, Finland, Sweden and Norway – promises to make headlines as it takes payments into uncharted waters.
During a recent webinar, ACI’s John Ballantyne, solution leader for real-time payments, was joined by Sabrina Small, consultant at Lipis Advisors, Daniel Szmukler, director at the Euro Banking Association, and Krishnakumar Chandrashekhar, vice president at digital payments solution company Mindgate Solutions, to discuss the opportunities and challenges of the P27 initiative. Katrin Boettger caught up with the moderator and panelists.
Katrin Boettger: First – what is P27 and why is it important?
John Ballantyne: P27 stands for 27 million, the number of people living across the Nordic countries. As part of the P27 collective, six Nordic banks have agreed to fund the development of the first cross-border, real-time payments platform in the region. P27 will enable real-time, batch, domestic and cross-border payments to be carried out quickly and at low cost between people and businesses within and between those countries. Its goal is to set a foundation that not only enables people and businesses to simplify current payment practices, but also allows innovative new payments services to be built on top, providing a better user experience. The ambition is to launch the payments platform in 2021.
KB: It certainly sounds like an ambitious project; what is the rationale behind it?
Sabrina Small: There are several forces at play when it comes to P27. First, the Nordic region is one of the most digitally advanced in the world; digital payments are already part of everyday life for the majority of people in those countries. There is a lot of trade between countries and to create a cross-border, cross-currency payments platform would be the logical next step to strengthen those ties. Finally, banks in the region understand that to protect their industry and to stop relinquishing control to new industry players, collaboration is the only way forward.
KB: What are some of the risks and challenges?
Daniel Szmukler: There are certainly a few challenges. Currently, there is a lot of fragmentation when it comes to specific rules and legislation for banks in the Nordic countries. All stakeholders will need to sit at the table and find ways to harmonize market practices and overcome the current level of fragmentation. I believe the most important challenge, however, will be to develop a joint vision and strategy when it comes to the banks’ value-added services. Creating the new infrastructure will be a first important step in that direction, but in my view the creation of the value-added services that consumers and businesses embrace will decide the success of the initiative.
SS: For me, the two most important challenges are the timeline itself – it always was even before the global pandemic hit. The second challenge, and here I agree with Daniel, is KYC (Know Your Customer) and how to harmonize the rules across different countries. Also, if stakeholders don’t get this right, there will potentially be lost investment, or investments made on multiple fronts. There are a lot of uncharted waters with this project.
KB: So what advice would you give to banks embarking on this ambitious project?
Krishnakumar Chandrashekhar: Banks in many ways have become agnostic, but they don’t have to go crazy. Yes, it is the tech players that are driving the big changes in payments. In India, for example, people now say, “Can you Google Pay me,” or “WhatsApp pay me.” Banks need to open up and collaborate with these new players and they will eventually bring in the volumes when it comes to transactions. Consumers have understood quickly; it doesn’t matter who provides them with the payment capability, what matters to them is that they get the experience they want, which is 24/7, anywhere and everywhere commerce.
DS: The Nordic banks embarking on this project understand that they need to collaborate to create a relevant and impactful customer proposition. Customers are looking for lifestyle propositions that include payments. They want contextual payments. They are looking to participate in connected commerce and if the banks are not part of the end-user ecosystem, it leaves the door open for other entrants to come in.
SS: I think we are at the beginning of an exciting journey. Globally, there are several major forces shaping and transforming the payments industry right now, including real-time payments, open banking and cross-border payments. P27 is an ambitious project, but it will lead to banks streamlining their operations, shutting down legacy infrastructure and modernizing their payments rails – all necessary steps to staying relevant and competitive in today’s brave new world of payments.
The P27 initiative is looking to build a cutting-edge, cross-border payments system, encompassing multiple currencies and payment types, including real-time. Find out more in our on-demand webinar: What Can You Learn from the P27 Opportunity?
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