The Nordic Cross Border Payments initiative, or P27, began in 2017 to simplify cross-border payments among Nordic countries. P27 is the first integrated real-time platform in the Nordics region formed by six major banks – Danske, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank. The platform will facilitate both domestic and cross-border payments in multiple currencies, in real-time while harmonizing the Nordics and the European payments landscape. The first live transactions are expected in 2022 in three countries – Denmark, Finland and Sweden. If successful, operations will expand to other Nordic countries. And while P27 is expected to bring many efficiencies to the payments system in the Nordic region, participating banks will need to take deliberate steps to prepare for this new platform.
Why the Nordics Need the P27 Payments System
The P27 initiative was started mainly to address the existing shortcomings inherent in the Nordic payments system that often lead to higher cost and handling time. These shortcomings include:
As such, any transaction between Nordic countries must go through a foreign exchange process which increases the payment handling time. Additionally, the fragmented settlement and clearing process in each country drives the cost per transaction higher.
Unlike the EU where a transaction between two nations occurs through the cost-effective Single-Euro Payments Area (SEPA), in Nordic countries, the different currencies force a settlement to happen through the SWIFT network. The transaction costs through SWIFT are about 3-4% of the transaction amount. As the transactions go through multiple banks, consumers incur higher transaction charges.
Furthermore, consumers and businesses in Nordic countries often make cross-border transactions forcing them to have multiple bank accounts across these countries. This creates operational inefficiencies and higher processing times.
The P27 platform will help address most of these concerns by enabling quick, real-time, batch, domestic and cross-border payments on a secure platform. The new infrastructure will bring simplicity and scale efficiencies while harmonizing and standardizing payments with better transparency. Furthermore, it will allow financial players to build complementary value-add services on top of the basic infrastructure.
P27 Readiness Check for Banks
While there are many benefits for ecosystem participants, the banking system will be faced with numerous challenges in the end-to-end implementation of the P27 platform. The following challenges could deter banks from enjoying the expected benefits arising from the new payment’s platform:
Imperatives for Banks Derive Benefits from P27
While working with banks across the globe, Wipro’s analysis revealed that many banks may face possible issues that will prevent them from enjoying the full benefits of P27. These issues include an outdated infrastructure, an obsolete security system and a lack of financial firepower and technology prowess. To overcome these issues, banks should address the constructive actions below to ensure they are better placed to adopt the P27 initiative.
Over time, P27 will increase interoperability, efficiency and save processing time. This will not only benefit consumers with more faster payments but it will open a wide new range of opportunities for financial institutions to collaborate and improve the consumer experience. While all Nordic banks will be watching the beta transaction program this year, taking steps now to prepare for a wider rollout is not only prudent but will help banks reap the full benefits of this new payment landscape.
To read more about the Nordic Cross Border Payments initiative (P27) click here. To follow the developments of the Nordic Payments Council (NPC) click here.
Sr. Vice President & Managing Director–Nordics Business Unit
WiproVinay is an accomplished business leader in the IT/ITeS industry and has recently take over as the Sr. Vice President & Managing Director of Wipro’s Nordics business unit. He has led the growth of large, global P/Ls across multiple sectors. He is passionate about creating client success & business value through IT and operations led transformation. He has been instrumental in establishing several technology and digital operations practices
General Manager–BFSI Hunting in the Nordics Business Unit, Wipro
Stefan joined Wipro since 2021 to lead BFSI in the Nordics. He is a passionate executive focusing on how the world of banking is changing rapidly into a highly digitalized, customer centric, open, automated and agile sector. Stefan is highly results driven and has a long track record of helping clients solve complex business problems