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November 11, 2019updated 13 Nov 2019 5:27pm

Project 27: Achieving cross-border unification across the Nordics is edging closer

By Briony Richter

Payment solutions are constantly evolving to keep up with the demand for a unified and seamless global payments system. Today, the cross-border landscape is at the centre of a growing number of emerging trends that will fundamentally change the competitive dynamics of the market argues Briony Richter

A seamless cross-border infrastructure will allow nations to trade faster and more securely. The tested methods of banks still hooked on legacy systems have encountered challenges from alternative solutions and new players.

The direction of these changes remains unclear, however the Nordic countries are edging that much closer towards a unified platform.

Owned by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank, the P27 Nordics Payments Platform is a modern payments platform that promotes trade and growth between partnering countries.

The aim is to facilitate quick, cross-border, multi-currency account to account payments for Nordic customers.

At the beginning of October, the six Nordic banks signed a shareholder’s agreement to accelerate the development of a real-time, cross-border payments platform as part of the P27 initiative.

The group also produced a business plan and strategically allocated the necessary funds for it to live in early 2021 with forecasts anticipating that it will break even within the first year.

P27’s next step is to obtain the necessary clearing licence in Sweden and merger filing approvals.

It is without a doubt that the Nordic payment markets are among the most advanced in the world. However, as technology constantly evolves, and provides customers with new means of payment so too must the systems that facilitate it.

That being said, differing national standards have blocked the development of modern payment services that are fit to achieve a borderless Nordic region.

Listed benefits of Project 27 for the industry include:

  • Lower costs, as improved scale and cost efficiency for infrastructure provider are passed on to banks
  • Faster responsiveness and adaptability to customer needs, as modernised payment infrastructure enables faster product development and adaption
  • Increased harmonisation of standards
  • Enablement of new products, services, and business models, with Project 27 as a platform for development of new products, e.g., cross-border mobile payment solutions

P27 aims to addresses several drivers of change.

Cross-border trade

 With around 27 million people living across the Nordic countries, a seamless cross-border system will enable all consumers, governments and banks to transact quickly and securely cross-country.

It is a timely project as countries like Sweden continue to move further away from cash.

The chief executive of the project, Lars Sjögren, said: “P27 will become the world’s first integrated domestic and cross border real-time payments platform. The Nordic banking sector already has a leading position in Europe, and P27 will help further expand and consolidate this position.”

Harmonisation of the national infrastructures and services offered will promote trade between the Nordic countries.

Once live businesses will benefit greatly from the ability to transact real-time payments across national borders.

The Nordic countries are export-dependant with the biggest part of trade occurring across the Nodic region. Therefore, P27 will accelerate cost-efficient and convenient trade.

Customer expectations

Customer demands have always been an important driving factor for the financial industry.

As technology improves and more players enter the payments market, customers are flooded with a vast array of choices that all aim to deliver a seamless and convenient banking experience.

With those options available, there is increasing pressure for the incumbents to up their game and deliver the same services for those at home and abroad.  Paying across borders, customers often experience high costs and extensive waiting time for transactions to be approved and delivered.

By standardising the clearing of payments across the Nordics, P27 strives to provide cross-border payments with the same transparency and low fees that customers experience with domestic payments today.

Regulation

 Globally, the financial industry is going through dramatic regulatory changes. In Europe PSD2 and Open Banking are pushing banks and financial organisations to be more transparent and embrace the growing competition that is now inevitable.

Financial authorities across Europe are pushing for more regulation that increases competition and delivers lowers fees on payment transactions.

However, different infrastructures and standards across the Nordics makes it costlier for banks to implement, and challenging to develop competitive services.

Overall, if successful Project 27 will make it simpler for banks to adapt to upcoming regulations, reduce implementation and transactional costs, and facilitate the development of new products and services for existing and future customers.

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