P27: Where Are We Now?

July 18, 2022
P27 has garnered interest way beyond the Nordic region that it is intended to serve, but questions still remain about how its remit will work and just how much say banks beyond the founders will have on its development.

P27 has garnered interest way beyond the Nordic region that it is intended to serve, but questions still remain about how its remit will work and just how much say banks beyond the founders will have on its development.

P27 is a joint Nordic venture by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank.

Having been established in 2017, it has since gained the seal of approval from antitrust regulators, and is dedicated to exploring the possibility of establishing a pan-Nordic payment infrastructure for domestic and cross-border payments in the Nordic currencies and the euro.

“The benefits of P27 are many and are expected to be significant for all market participants across the payments value chain,” Jens Olsson, a senior fintech advisor based in Sweden, told VIXIO.

“The investments in the payment infrastructure are longed for and the effects seen will go way beyond cost efficiency and harmonisation in the Nordics.”

It will catalyse further innovation and raise competition, Olsson predicted. “As an example, having domestic and cross-border instant payments as the baseline for account-based payments will enable new services in the marketplace that are cost-efficient as well as lower the entry barriers for new market participants that seek to innovate.”

Otherwise new entrants and solutions would need to be supported by systems to mitigate the risk of non-settlement of payments to provide instant delivery of goods and services across the Nordics, he continued.

“P27 brings much-needed investments in payment infrastructure where the need to cooperate is critical to success and the aim is to have harmonisation, such as no differentiation in this layer,” he said, adding that P27's offering leaves plenty of room for value innovation by market participants.

“I believe these factors contribute to the high interest and will determine the future success of P27.”

Is everyone on equal footing?

The P27 is not just home to the established Nordic banks that were its founders, it is also designed to cater for smaller banks in the region, leaving a question mark over how much say they will have.

There are, for example, concerns in the industry that these small and medium banks may not have as much access to information as the founding banks do.

“From my point of view, everybody is on equal footing,” assured Thomas Bo Christensen, Danske Bank’s core banking director, while doing a LinkedIn livestream with Volante Technologies. “What you could say is that you have the first mover banks and the long tail banks, or PSPs.”

P27 has been very active in ensuring it communicates the same stuff to all participants, and future participants as well, he said. “Essentially, you are a frontrunner or in the longtails but you will need to do the same testing and onboarding process with the P27 information available for you.”

Banks that are not founders will also have a longer timeline to prepare for P27, he added.

The full transition, he said, is foreseen to happen in late 2025 or early 2026, he said.

Collaboration like this is not unusual in the Nordics. The economies of scale in the region does not sustain a large number of market players and a more joined up approach is needed. The market has established areas it sees as competitive and those that will benefit from collaboration.

For example, Sweden's Bankgirot, one of the first interbank clearing systems and since merged with P27, was founded as a consortium of the country’s 14 largest banks in the 1950s to improve efficiencies.

The region's successful mobile payments services, such as MobilePay in Denmark and Vipps in Norway, are well established examples of market collaboration.

For example, MobilePay started out as a subsidiary of Danske Bank competing against other bank-based mobile payment services. When it became clear that MobilePay had emerged as the preferred solution, other banks migrated to MobilePay with Danske Bank creating a separate subsidiary and removing its branding.

This ethos lives on with P27 and preparations are already well underway. More than a dozen Swedish banks that are connected to the mobile payments system Swish are set to test the pan-Nordic payments platform P27 by the end of the year.

Bo Christensen did, however, warn that communication between banks can only go so far.

“You need to be very much aware that you don’t break competition laws here,” he said. “In essence, you could say that P27 is providing the infrastructure, but when it comes to product offerings towards customers, that is off limits for discussion between banks.”

The banks will still be in competition with one another, he said.

Maybe also the solution providers can assist their customers in these discussions, the Danish banker suggested.

Bo Christensen also expressed optimism that the banks will reach their targets for the P27, even if they are dealing with competing deadlines such as ISO 20022.

“We have full focus and our internal management is geared to manage the workload ahead of us,” he said. “We have the ambition to succeed, even though it is very ambitious.”

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