Insight

P27: An innovative approach to connecting Nordic payments

By Mark Kane

Oct 06, 2022

The vision of Project 27 (P27) is simple but ambitious; to establish a multi-currency payment clearing house across the Nordics. Created and driven by six leading Nordic Banks, the idea of P27 is to stand up as the first multination facility for domestic and cross-border payments in multiple currencies. P27 will establish one single Nordic payments infrastructure for all twenty-seven million inhabitants.

The drivers behind P27 and its benefits are clear

1. Tackling inefficiencies

To combat the disjointed Nordic payments landscape across neighbouring Nordic regions, P27 introduces a standardised payments infrastructure. Today, multiple systems are working to support the same processes. The introduction of P27 will provide one shared platform which will present harmonisation across Danish, Finnish and Swedish borders. With over 25 per cent of Nordic cross-border trade taking place in the Nordics, it makes sense to introduce a shared platform.

2. Economic growth

Organisations operating across all Nordic regions are subjected to differing national payment standards, hefty transaction costs and multiple payment solutions. For organisations and customers, the experience of having different payment platforms is outdated. Instead of being exposed to twenty to thirty different payment types, the process could become significantly more streamlined. P27 benefits extend beyond payment processing. Individuals and organisations should enjoy the benefits of simplified operations, clearer and reduced pricing and instant cross-border transactions.

3. Wider unity

Although the focus of P27 is on the Nordics, the project will strengthen the region’s ties with Europe and beyond. P27 is aligned to Single Euro Payments Area (SEPA), a system of transactions created by the European Union to harmonise cashless payment transactions between European countries. It is also built in the global ISO 20022 payments standard. ISO 20022 is becoming the international language for payment messaging, with multiple central banks already using or planning to engage with it over the coming years. With ISO 20022 predicted to support around 80 per cent of global payments traffic by 2025, aligning with the de facto standard strengthens the P27 business case.

After nearly two years of delivery, Swedish banks aim to test the payments platform later this year. Danish counterparts will need to follow suit, but the road to readiness won’t be without hiccups, as cross-country coordination brings opportunity through complexity.

Determining what P27 means for organisations

Organisations have a challenge of understanding what P27 means to them. To tackle this issue, they must assess the P27 requirements, determine their current capabilities, and map out areas requiring uplift.

Organisations should identify the key capabilities likely to be impacted by P27 and begin hosting workshops between business- and technology-focused Small and Medium Enterprises (SMEs), enabling organisations to determine the challenges and high-level opportunities for P27 adoption. They should have an overview of the new technologies they may need and the areas ripe for P27 adoption.

Setting up for success

Once banks know the high-level changes that P27 will mean for core banking infrastructure, systems, processes and their people, robust planning is required to mobilise a programme, scope out granular delivery details and execute plans.

Organisations must develop a future-proof business case that defines the reasonings for change and capitalises on the changes P27 introduces. They should prioritise strategy planning, outlining their approach and roadmap for delivery. It’s essential to get this right as, without solid foundations, companies will face challenges when requesting core resource skill sets and functional capabilities not previously identified at a later point in time.

But discovery is only one piece of the puzzle. Challenges for organisations will arise from contention with neighbouring programmes competing for the same contested SMEs. Firms must consider the future ad capture the correct capabilities they need to implement now. Early engagement with third-party vendors is paramount to close gaps where capabilities are not present.

Thinking about the bigger picture

Compliance is the immediate priority. With concrete deadlines to work against, the focus is to hit the pre-defined milestones ahead with Sweden’s October 23 go-live fast approaching. However, firms must keep an eye on internal inefficiencies and evolving customer demands to consider how they can utilise P27 changes to introduce new value propositions for their customers.

Firms should conduct P27 opportunity assessments that investigate current process pain points, helping identify the areas ripe for P27 adoption. A payments modernisation lens can then be overlayed to assess the benefits that P27 brings and determine the art of the possible for new and improved customer products and services. Banks should work closely with their corporate customers to determine realistic improvement areas.

Alternatively, banks should look to strengthen identified pain points. As the ISO 20022 standard is the basis for P27, payment formats should be more structured, standardised and rich in data. Firms could leverage cleaner customer data for improved screening and reconciliation processes, ensuring efficiency and appropriate priorities.

P27 is more than a payments transformation, but forward-looking design-thinking must start now

As with any transformation, organisations usually look to keep the show on the road first and, if progressing well, begin exploring improvements. The hope is that P27 is more than just a payments transformation. While compliance would be a significant step for the Nordics, P27 would be a broader opportunity in trade, growth, and employment, improving the foundations for innovation.

About the authors

Mark Kane Financial services expert Financial services expert

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