P27 pan-Nordic payments system moves a step closer

An ambitious cross-border payments system for the Nordic countries has moved a step closer after being in the planning stages for some time. The initiative involves Mastercard and the P27 Nordic Payments Platform, which is a collaboration owned by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank.

The aim of the partnership is to provide real-time and batch payments across the Nordic markets, which would include the handling of payments across borders and in multiple currencies, almost instantaneously.

The P27 collective has now formed closer ties and made further commitments to the scheme. The six banks involved have all signed shareholders’ agreements and agreed on a business plan. They have also made financial commitments to fund the developing scheme until it can sustain itself financially, which may be two to three years from now.

“This is an important milestone for P27, proving that it is possible to do cross-border infrastructure projects of this kínd,” said Martin Georgzén, head of strategy and communications at P27 Nordic Payment Platform.

The next step is to continue developing the platform and working towards the necessary regulatory permissions and licences. Given that banking in the Nordics is already highly digital and enjoys considerable public trust, neither of those hurdles should be insurmountable.

But there are still challenges to overcome. On the platform side, Mastercard and the six banks will have to devise a seamless system for cross-border, cross-currency payments in close to real time, which is by no means straightforward. The platform will also have to compete with other international money transfer players in this market, so the margin for error – and profit – could be small. If the system is not competitive, for example in terms of exchange rates and ease of use, customers will go elsewhere.

On the regulatory side, the P27 group is likely to apply for a clearing licence soon. As the banks already have licences in their relevant territories, this application may be little more than a formality. On the other hand, the scope of the P27 partnership is newer and broader than any individual Nordic bank’s reach, so regulators are likely to look closely at the implications for market competition before granting the required licences.

The group is upbeat and positive about the scheme’s future. “When P27 is operational, it will pave the way for further innovation in the payments space,” said Georgzén. “A Nordic common payment infrastructure could make it even more attractive for fintechs to select the Nordics as their home base and it will certainly increase cross-border trade by simplifying the way we do business in the Nordics.”

The P27 platform is scheduled to go live in 2021.