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The pan-Nordic payments wannabe P27 has decided to withdraw its clearing licence application from Sweden’s Finansinspektionen, blaming a changing market — a decision that could perhaps signal the end of the ambitious project.
The prerequisites for building a new pan-Nordic critical payment infrastructure have changed since P27 was launched in 2019, while new requirements and regulations have challenged its operating model.
That is according to a company press release explaining that it will not be proceeding with its plans to obtain a clearing licence in Sweden.
“We fully understand and endorse the high requirements and expectations which applies to us as a provider of critical payment infrastructure,” said Paula da Silva, the project’s chief executive.
P27 are now in a dialogue with owner banks to evaluate the best options going forward.
“We have a strong banking community in Sweden that have always taken common responsibility to ensure a resilient and robust payment infrastructure,” she said.
An uncertain future
The news has caused a stir among the payments industry in the Nordics and further afield, with one source quipping that Mastercard “must be fuming”, considering it had won the contract to build and run the infrastructure.
“The withdrawal of P27’s application marks an uncertain future for the payment infrastructure in the Nordics,” said Jens Olsson, a Stockholm-based fintech consultant.
"Not a piece of great news for the Scandinavian payments space, but a delay is better than a disaster,” commented Ritesh Jain, founder of Infynit.
Although Jain said that it is disappointing to see such a promising initiative struggling, P27 continues to work with Bankgirot to ensure the current payment infrastructure remains operational as needed.
“To ensure P27's success and maximise its impact, industry players and regulators must collaborate and find innovative solutions that address the needs of all stakeholders and promote greater financial integration across the Nordic region.”
However, others are not as enthusiastic about its future.
“It is dead in the water,” said one source.
The source continued that they had been predicting that this would happen since Sweden and Denmark’s central banks, as well as mobile payment system Swish, opted to join the European Central Bank’s (ECB) TARGET Instant Payment Settlement (TIPS).
The press release too acknowledges the situation in Denmark, with the news that the Danish banking sector had decided to proceed with other payment solutions.
Sweden’s Riksbank and the ECB have also been collaborating on a cross-currency instant payments project, which began in 2020.
Therefore, the cross-currency purposes behind the P27 may have been somewhat solved before it could come to fruition.
"You could argue that the new regulations and new market trends especially within Open Banking, token as a service, blockchain and Web3 among other new flexible structures, were way faster to market and solved the main challenges for companies and private individuals related to payments and data,” said Ruben Nielsen, vice president at Finaro.
“Personally, I think the project was interesting,” he acknowledged. “But, looking ahead now, new companies are filling a gap in the market."
Despite the diminishing requirement for a cross-border use case and the decision to withdraw its Swedish licence application, Olsson acknowledged a domestic demand.
“Even though the investment into a pan-Nordic infrastructure may be down the drain, there is still a strong need for investments to be made in order to replace the current domestic infrastructure which has passed its best before date,” he said.
A tricky path
P27’s progress has been up and down.
"I suddenly had a feeling that things weren't going as they should,” said one Danish source.
The source, who had worked with the project in its earlier days, explained that it began very ambitiously.
"From when I was at the project and the planning we had at the time, we were starting migrations in 2019 to new infrastructure,” the source said.
Established in 2017, P27 had been successful in gaining the seal of approval from competition regulators at both country and EU level.
Yet, shortly after the formation of P27, Norway’s largest bank, DNB, pulled out of the project, leaving Norway without any representation.
Following this departure, the board of Norway’s bank association, Finance Norway, stopped evaluating P27 as an option for the Norwegian banking community.
In other areas too, progress has been limited, such as the failure to get a Swedish licence in 2019 due to new regulations that “challenged” P27’s operating model.
In 2021, Swedish central banker Henry Ohlsson complained that “we have seen many reports, many reports are being written, many conferences are being held. I would very much like to see more action within this area.”
"Looking back on what the plan was, we should have been live by now,” said the source.
On the vendor side, the source pointed out that a lot had happened, but looking back, dealing with governance issues and competition laws was “super heavy”.
“One of biggest issues was complexity of Swedish infrastructure which is very outdated,” the source added, explaining that its complete overhaul was a tough challenge to take on. “And, there became too much focus on the product side, and not rails.”
“Our vision was to provide a better payments infrastructure to the 27 million people living in the Nordics, with an optimistic timeline,” said da Silva. “Lately, it is evident that our vision was too ambitious and complex.”
For now, the company will be reassessing its future ambition in the Nordic payments market, she said.
"It is a real shame,” said one source. “There are very clever people working on it, who must be devastated."
VIXIO approached Mastercard for comment but they had not responded by the time of publication.
