P27 advance could replace multiple national clearing systems in Nordics

The drive to advance digitisation in the Nordic banking system has taken another step forward through a plan headed by P27 Nordic Payments to create future digital infrastructure and platforms.

Following approval by Finance Denmark, the Danish financial services central organisation, the plan will see P27 Nordic Payments become the new national clearing house in Denmark for traditional and smart payments for businesses and private consumers.

The clearing house will also enable bill settlement and real-time payments to other Nordic countries, including Sweden and Finland, with Norway expected to join at a later date.

The long-term ambition of the P27 Nordic Payments operating plan is to integrate all Nordic mobile payment systems under a single cross-border digital platform. In effect, P27 Nordic Payments is taking over and replacing existing infrastructure and national clearing house responsibilities and tasks that were previously conducted by Finance Denmark.

P27’s new role, supported by an updated digital payments infrastructure, will make it possible for a MobilePay app user in Denmark to transfer money to a Swish payment app user in Sweden, said Michael Busk-Jepsen, director of digitisation at Finance Denmark.

“The building blocks being put in place can potentially result in a pan-Nordic clearing setup with full interoperability across the region, which can one day replace the current national clearing operations,” he said.

The future-looking technical innovations being developed by P27 Nordic Payments will provide the foundation for the development of innovative digital-based bill payment services that will be largely targeted at a Nordic marketplace, said Busk-Jepsen.

The elevation of P27’s role is happening against a backdrop of heightened activity by partner banks in the region to enhance their digital infrastructure and offerings to customers.

Last month, Danske Bank launched its Turn to New Tech initiative, which embraces greater use of application programming interfaces (APIs), cloud technology and improved use of data across all core areas of the bank’s operating units. 

P27 Nordic Payments is owned by the Nordic region’s largest commercial banks – Danske Bank, Svenska Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank.

Notably, the “common Nordic payments platform” marks a new chapter in so-called mutual interest collaboration between the six rival finance groups. The deepening of cross-border cooperation has gained critical traction in the face of sharper competition in the digital payments sector from a growing number of fintech disrupters and niche online banks.

One of the platform’s core functions will be to operate Denmark’s retail payments system, a role that involves the use of digital systems and services that simplify the process for businesses and private citizens to pay bills and make cross-border payments in real time.

Busk-Jepsen added: “The new infrastructure will enable banks to make digital payments in other Nordic countries using Nordic currencies through a single platform and with the same rules and standards as apply under the Single Euro Payments Area.”

The EU Single Euro Payments Area initiative came in to force in 2014 and covers all EU member states, plus Iceland, Liechtenstein, Norway, Switzerland and Monaco.

“The Nordic region will soon become one of the first regions in the world where sending payments in real time in different currencies and between different countries will be just as easy as sending a text message,” said Busk-Jepsen.

The digital revolution within Danish and Nordic banking is taking place amid national financial supervisory authorities’ ongoing development of state-of-the-art rules and policy measures to better regulate new and emerging technologies in the financial arena.

Finanstilsynet, Denmark’s national financial services authority (FSA), is drafting a working strategy to deal with the domestic and cross-border regulation challenges presented by the latest financial technology (fintech). It intends to deliver a working paper covering new technologies in the finance sector in 2023.

The working paper’s findings will be incorporated into the FSA’s Strategy 2025 Plan, which is directed at reinforcing supervisory rules to reflect the digitisation of society and the future deployment of artificial intelligence (AI), cloud and other advanced technologies by banks and fintechs.  

The FSA’s key regulatory focus is on constructing risk-based rules for banks, fintechs and other financial groups to combat money laundering, and enabling improved access to, and regulation of, data, open finance, cryptocurrencies and the use of AI in digital finance-based consumer products.

The development of new regulations and supervisory rules will require a close dialogue with the financial sector, said Tobias Thygesen, head of the FSA’s fintech, payment services and governance, a department that is also responsible for digital and technology innovations.

“Our objective is to support the development of the increased digitisation of business models, players and products,” he said. “As a result, the FSA will focus on the potential and risks that come with developments, especially within the fintech area.”

The FSA’s dialogue with the financial sector will involve close cooperation over procedures and the testing of new tech solutions, using the authority’s dedicated regulatory sandbox, FT Lab.

Nordic finance sector-led technology initiatives, such as Danske Bank’s Turn to New Tech, will be guided by future new regulations emanating from national FSAs such as Finanstilsynet.

The Turn to New Tech project is designed to strengthen Danske Bank’s IT platform and accelerate the development of next-generation innovations that support the expanded use of digitisation, APIs, cloud technology and data-based advanced analytics.

“Turn to New Tech will accelerate our production and innovation around customer offerings,” said Bo Svejstrup, chief technology officer at Danske Bank and transformation lead for the Turn to New Tech project. “We are also looking for user-friendly solutions that help our employees enjoy a greater level of autonomy and can also make the workplace a more fun and pleasant environment.”

Danske Bank’s initiative will include input from the group’s 4,500 software engineers, analysts and business developers. Along with a wider use of APIs, the bank plans to embrace an expanded range of public cloud-related technologies.

This will, by necessity, involve using systems from major external providers, such as Amazon Web Services. This strategy will allow the bank to access the latest innovations more cost-effectively without having to develop capital-intensive technology in-house.