Above and beyond

Peter Larsson of Volante Technologies and Kasper Mortensen from Nordea describe how the forward-thinking Nordics are starting to look beyond P27 – towards the next innovations and the rest of the world

The mercurial Nordic region has long been recognised for financial services innovation. In 2017, six top regional banks and other financial sector players got together to from what would become a new Nordic payments platform called Project 27 (P27) – the world’s first real-time, cross-border payment system in multiple currencies.

It set out to connect the close-knit countries of Denmark, Sweden, Finland and Norway to give the region’s 27 million inhabitants and its businesses a more seamless payments experience – but the spin-offs will go much further than that.

With the first stage of implementation now imminent in Denmark, Finland and Sweden, the Nordic Payments Council (NPC) is looking beyond P27 going live, to how its members can ‘innovate on top’. The bar has been raised for creating an even better user experience, more commercial opportunities for local banks and, ultimately, interconnectivity with Europe and the rest of the globe.

We asked Peter Larsson, business development director of Swedish countries. Where we are commuting and sharing investments, we need to do those transfers cheaply and simply. We don’t need to open extra bank accounts in the country we choose to live in; it should be very simple to pay for everything.

KASPER MORTENSEN: Even before P27 goes live, there are many innovations going on in the market. There are bill payments, on the back of Request to Pay (RTP), and many other big opportunities for us, as a Nordic bank, to improve our product offering and commercialise on top of the infrastructure.

For many years, we have not really developed many advanced payment products, and, if we take MobilePay and Swish out of the equation, there is a lot that can be done differently.

payments-as-a-service provider Volante Technologies and member of the NPC and European Payments Council (EPC), and Kasper Mortensen from Nordic bank Nordea and a founding member of the P27 advisory board, what happens next.

THE PAYTECH MAGAZINE: You’re now very close to sending card payments over the P27 network, but what are the opportunities for future innovation?

PETER LARSSON: Bill payments represent a real game changer for the industry. In Sweden, we’re also aiming to move batch services from existing banks into P27, for invoicing, pensions, salaries, consumer account-to-account transfers, and for merchants and corporates too. Confirmation-of-payee will secure payments by ensuring, before we make them, that the beneficiary represents an actual person or company, to reduce fraud.

In the Nordics, we do a lot of business between our countries. We live in Malmö, in Sweden, and work in Copenhagen, for instance, and Norwegians, Swedes and Danes invest in properties in each others’

Just the start:

Corporates and international banks could all benefit from what P27 represents

While bill payments will be one of the first commercial products that will be built on top of P27, I am completely convinced that all banks are already looking at opportunities to enhance or add to their existing customer value propositions.

PL: There is growing interest in how corporates can benefit from this, with opportunities for any bank to offer services around reconciliation, so that you get richer information in the payments. Using that reconciliation, corporates can forecast much better because they get payment advice or status updates. Once I select who I have to pay, the bank can update the corporate, saying ‘Peter Larsson has accepted a payment and he will pay on Saturday or early Monday’. That is good for forecasting and allows a corporate or a merchant to make the most use of their liquidity, going forward.

TPM: What are the developmental imperatives of P27 for the Nordic region?

KM: One of the most critical objectives surrounds the fact Nordic banks have been sitting on a tremendously big legacy infrastructure, built over many years, in Norway, Sweden, Denmark and Finland.

One of P27’s core objectives is to modernise, to ensure we can build new components on top of product offerings and compete with the ever-changing competitive landscape, which is not just incumbent banks anymore. There is also competition from fintechs and new kinds of businesses that are bringing new models to market.

It has been extremely costly to run and do maintenance on a significant number of legacy infrastructures, for a long time. For us, as a Nordic bank, to stay competitive and ensure we can offer our customers the best solutions, we need to modernise and take costs down. In fact, cost is a major topic for a lot of banks. Interoperability is also important, so that our infrastructures can communicate with one another and be able to bridge not only the Nordic area but the entire world, via P27.

PL: The business case is not unique to P27, because we have seen initiatives like the United Payments Interface (UPI) in India, PayNet in Malaysia, and Pay.UK in the UK. But I get a lot of interest from international banks that are monitoring and viewing how we are succeeding on this. It’s a market for them, of course, but it’s also a blueprint for making European payments more efficient. Immediate payments were introduced very early in Sweden and also in the UK, but, from a European perspective, we are fragmented in many ways. P27 could act as a payments integration blueprint for wider Europe. European based. So, with ISO 20022 becoming more dominant and harmonising payments, taking a step into the European region is not that big, following the same trends as the rest of the world.

TPM: What steps will Nordic players, of any size, need to take in order to TPM: So, how do you see P27 dovetailing prepare for this wider compatibility?

with the wider world for payments, and PL: We’re used to building solutions how does the universal adoption of in-house and learning from those ISO 20022 play into that? lessons. Given the commoditisation of

KM: All the Nordic banks behind payments, outsourcing infrastructure is P27 are very aware that bringing one way of reducing the risk, or learning more interoperability, as well as making from the experiences of others out there, life easier for us and enabling more too. Our main focus is lowering the opportunities for our customers, will lower threshold to make it simpler for banks to the barriers to entry for our European and take that step into other markets. international competitors. Today, if you are KM: By harmonising and ensuring an international bank that wants to do core we have one infrastructure, with the business in the Nordic area, if you want to same methodology, P27 members create be a clearing partner, there is significant new products on top to commercialise, investment in not and only have to ‘think only running and All the Nordic Nordic’. That is completely maintaining your banks behind different to how we’ve operation, but you also need to do it in four P27 are very aware built products for the last 25 years, because almost different countries. That that bringing more all of them now relate to will be harmonised. interoperability, as each and every country. So, it’s a major change in terms of how we deal well as making life That will definitely be a game changer. It will with competition. We easier for us and also take the operational have to ensure we have enabling more cost down, giving value propositions that customers understand opportunities for our organisations other than banks access to and welcome. customers, will lower the infrastructure,

PL: Getting an the barriers to entry changing the understanding of ISO 20022, and the for our European competitive landscape. We’ve created an interoperability cases, and international infrastructure, in P27, not only among our tier competitors which is modern and one banks but smaller flexible enough to players too, is important so that they enable organisations to consume new can create payments and offer them standards like ISO 20022, giving them a into the European market more flexibly. bigger tool to define their own products It is complex to get to that level, because and services and tailor them for bigger many are indirect today, but with audiences or new markets. harmonisation and the ISO development, I think it is extremely valuable for us, it’s something some of our banks can as a bank, to first of all understand whether leverage, and are investing in now to reach we are a big creditor bank, or would like to Europe and even the US. increase our consumer flow.

The great thing with the NPC is that we We now need to agree, as a complete bring four different countries, with their Nordic industry, and negotiate on new different rule books, into one. That’s massive, terms for some of the Nordic products, and also mirrors European Payments Council where some are seen as sector products, requirements. We use different account and some will, of course, be owned and structures and have some additional fields developed by each and every bank, or and attributes, but the rest is 99 per cent any other competitor that’s out there.