The biggest Nordic banks expect to launch a new piece of financial infrastructure next year, promising to dramatically speed up international transfers in one of the world’s most technologically advanced regions.
The aim is to make it possible to clear payments and settle accounts within seconds, regardless of currency. The P27 project — so-called for the 27 million people who live in Sweden, Norway, Denmark and Finland — will build on the success of smart-phone payment applications that Nordic banks have already created, like Swish in Sweden, Norway’s Vipps, and MobilePay in Denmark.
“It’s going to be very big, because you don’t just easily change the payment infrastructure,” said Henrik Bergman, deputy director for financial infrastructure at the Swedish Bankers’ Association.
The collaboration reflects an effort to stay ahead of global technology giants like Apple Inc. and Samsung Electronics Co. Ltd. as customers no longer rely exclusively on their banks for financial services. The difference between P27 and the payment apps Nordic banks already offer is the cross-border nature of the project. What’s more, transactions won’t face the same caps that existing payment apps do.
Bergman says banks and their customers may need to make substantial changes to their technology setups to participate. They “may have to adapt to something totally new. They may have a structure that’s easily adapted or an IT structure that’s more difficult,” he said.
Jesper Nielsen, head of banking in Denmark for Danske Bank A/S, says lenders behind P27 expect to have selected a company by the end of the year to help guide the project, with the first payments possible in 2019. Danske and Nordea Bank AB are among seven banks behind the project.
Banks are eager to provide infrastructure that locks customers in. And with branch visits going the way of cash, digital payments are one of the few points at which banks and their clients meet up.
Getting this infrastructure right is key to the financial industry’s future success. The area of payment services in banking didn’t use to be “sexy, but it is now,” Nielsen said. It is “where you may have the most visible competition and where you basically have the customer interface.”
The banks working on P27 are also eager to ensure that their project has a hand in shaping a European-wide settlement system. Norway, Sweden and Denmark all have their own currencies. Finland uses the euro. Connecting those four currencies in a common cross-border payment system “will give us some leverage,” Nielsen says.
The result will be to have “the most digitized societies in the European Union playing a much bigger combined role in setting the standards for a European clearing system,” he said.
The project should be up and running by the time Europe’s revised Payment Services Directive takes effect next year. The new rules require banks to provide other companies — including rivals and technology startups — access to client-account data if customers want them to.
Nielsen says having a common set of standards for payments will be key once that new world order kicks in. “If you don’t agree on standards, you’ll have a fragmented picture across the Nordics but also across Europe, which would be counter-intuitive to what we actually set out to do by creating an open structure at a Europe level,” he said.
The P27 group is still consulting with central banks, since all transactions eventually go through their systems.
“The work is on the rules first, and then who is going to deliver and what will be the system — those are the next questions,” Bergman said.