EXCLUSIVE: “Above and Beyond” – Peter Larsson, Volante Technologies and Kasper Mortensen, Nordea in ‘The Paytech Magazine’
Peter Larsson of Volante Technologies and Kasper Mortensen from Nordea describe how the forward-thinking Nordics are starting to look beyond P27 – towards the next innovations and the rest of the world.
The mercurial Nordics region has long been recognised for financial services innovation. In 2017, six top regional banks and other financial sector players got together to from what would become a new Nordic payments platform called Project 27 (P27) – the world’s first real-time, cross-border payment system in multiple currencies.
It set out to connect the close-knit countries of Denmark, Sweden, Finland and Norway to give the region’s 27 million inhabitants and its businesses a more seamless payments experience – but the spin-offs will go much further than that.
With the first stage of implementation now imminent in Denmark, Finland and Sweden, the Nordic Payments Council (NPC) is looking beyond P27 going live, to how its members can ‘innovate on top’. The bar has been raised on creating an even better user experience, more commercial opportunities for local banks and, ultimately, interconnectivity with Europe and the rest of the globe.
We asked Peter Larsson, business development director of Swedish payments-as-a-service provider Volante Technologies and member of the NPC and European Payments Council (EPC), and Kasper Mortensen from Nordic bank Nordea and a founding member of the P27 advisory board, what happens next.
FINTECH FINANCE: You’re now very close to sending card payments over the P27 network, but what are the opportunities for future innovation?
PETER LARSSON: Bill payments represent a real game-changer for the industry. In Sweden, we’re also aiming to move batch services from existing banks into P27, for invoicing, pensions, salaries, consumer account-to-account transfers, and for merchants and corporates, too. Confirmation-of-payee will secure payments by ensuring, before we make them, that the beneficiary represents an actual person or company, to reduce fraud.
In the Nordics, we do a lot of business between our countries. We live in Malmö, in Sweden, and work in Copenhagen, for instance, and Norwegians, Swedes and Danes invest in properties in each other’s countries. Where we are commuting and sharing investments, we need to do those transfers cheaply and simply. We don’t need to open extra bank accounts in the country we choose to live in; it should be very simple to pay for everything.
KASPER MORTENSEN: Even before P27 goes live, there are many innovations going on in the market. There are bill payments, on the back of Request to Pay (RTP), and many other big opportunities for us, as a Nordic bank, to improve our product offering and to commercialise on top of the infrastructure.
For many years, banks have not really developed many advanced payment products, and, if we take MobilePay and Swish out of the equation, there is a lot that can be done differently.
While bill payments will be one of the first commercial products that will be built on top of P27, I am completely convinced that all banks are already looking at opportunities to enhance or add to their existing customer value propositions.
PL: There is a growing interest in how corporates can benefit from this, too, with opportunities for any bank to offer services around reconciliation, so that you get richer information in the payments. Using that reconciliation, corporates can forecast much better, because they get payment advice or status updates. Once I select who I have to pay, the bank can update the corporate, saying ‘Peter Larsson has accepted a payment and he will pay on Saturday or early Monday’. That is good for forecasting and allows a corporate or a merchant to make the most use of their liquidity, going forward.
FF: What are the developmental imperatives of P27 for the Nordic region?
KM: One of the most critical objectives surrounds the fact Nordic banks have been sitting on a tremendously big legacy infrastructure, built over many years, in Norway, Sweden, Denmark and Finland.
One of P27’s core objectives is to modernise, to ensure we can build new components on top of product offerings and compete with the ever-changing competitive landscape, which is not just incumbent banks anymore. There is also competition from fintechs and new kinds of businesses that are bringing new models to market.
It has been extremely costly to run and do maintenance on a significant number of legacy infrastructures, for a long time. For us, as a Nordic bank, to stay competitive and ensure we can offer our customers the best solutions, we need to modernise and take costs down. In fact, cost is a major topic for a lot of banks.
Interoperability is also important, so that our infrastructures can communicate with one another and be able to bridge not only the Nordic area but the entire world, via P27.
PL: The business case is not unique to P27, because we have seen initiatives like the United Payments Interface (UPI) in India, PayNet in Malaysia, and Pay.UK in the UK. But I get a lot of interest from international banks that are monitoring and viewing how we are succeeding on this. It’s a market for them, of course, but it’s also a blueprint for making European payments more efficient. Immediate payments were introduced very early in Sweden and also in the UK, but, from a European perspective, we are fragmented in many ways. P27 could act as a payments integration blueprint for wider Europe.
FF: So, how do you see P27 dovetailing with the wider world for payments, and how does the universal adoption of ISO 20022 play into that?
KM: All the Nordic banks behind P27 are very aware that bringing more interoperability, as well as making life easier for us and enabling more opportunities for our customers, will lower the barriers to entry for our European and international competitors. Today, if you are an international bank that wants to do core business in the Nordic area, if you want to be a clearing partner, there is significant investment in not only running and maintaining your operation, but you also need to do it in four different countries. That will be harmonised.
So, it’s a major change in terms of how we deal with competition. We have to ensure we have value propositions that customers understand and welcome.
PL: Getting an understanding of ISO 20022, and the interoperability cases, not only among our tier one banks but smaller players too, is important so that they can create payments and offer them into the European market more flexibly.
It is complex to get to that level, because many are indirect today, but with harmonisation and the ISO development, it’s something some of our banks can leverage, and are investing in now to reach Europe and even the US.
The great thing with the NPC is that we bring four different countries, with their different rule books, into one. That’s massive, and also mirrors European Payments Council requirements. We use different account structures and have some additional fields and attributes, but the rest is 99 per cent European based. So, with ISO 20022 becoming more dominant and harmonising payments, taking a step into the European region is not that big, following the same trends as the rest of the world.
FF: What steps will Nordic players, of any size, need to take in order to prepare for this wider compatibility?
PL: We’re used to building solutions in-house and learning from those lessons. Given the commoditisation of payments, outsourcing infrastructure is one way of reducing the risk, or learning from the experiences of others out there, too. Our main focus is lowering the threshold to make it simpler for banks to take that step [into other markets.
KM: By harmonising and ensuring we have one infrastructure, with the same methodology, P27 members create new products on top to commercialise, and only have to ‘think Nordic’. That is completely different to how we’ve built products for the last 25 years, because almost all of them now relate to each and every country. That will definitely be a game-changer. It will also take the operational cost down, giving organisations other than banks, access to the infrastructure, changing the competitive landscape.
We’ve created an infrastructure, in P27, which is modern and flexible enough to enable organisations to consume new standards like ISO 20022, giving them a bigger tool to define their own products and services, and tailor them for bigger audiences or new markets.
I think it is extremely valuable for us, as a bank, to first of all understand whether we are a big creditor bank or would like to increase our consumer flow.
We now need to agree, as a complete Nordic industry, and negotiate on new terms for some of the Nordic products, where some are seen as sector products, and some will, of course, be owned and developed by each and every bank, or any other competitor that’s out there.
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