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Rails now being laid for simpler and cheaper Nordic payments

The rails are now being laid for the new Nordic payments infrastructure that will be implemented in the coming years. The goal is to enable multi-currency real-time payments throughout the Nordic countries, remove friction in foreign trade and create opportunities for companies to streamline their payment processes.

P27 Nordic Payments is a joint-bank initiative that aims to create the world’s first payments area for domestic and international multi-currency real-time payments. The platform will initially cover payments in Sweden, Denmark and Finland, but is being developed to be used throughout the Nordic region over time.

The project started in 2018, and in October last year a company was formed that is co-owned by six banks: SEB, Danske Bank, Handelsbanken, Nordea, OP Financial Group and Swedbank.

Since then, the members have established the Nordic Payments Council, which is establishing the rules for how Nordic payment products shall be handled. In Sweden, the Swedish Bankers’ Association has formed a Migration Committee, which will coordinate the banks’ migration to the new infrastructure, and similar initiatives are being conducted in the other Nordic countries.

What is happening going forward, and what does the timetable look like?

We put these questions to Paula da Silva, head of Transaction Services and interim chair of the P27 company, and Robert Pehrson, head of business development in Transaction Services and SEB’s representative on the company’s Advisory Board.

“At SEB we will be informing large corporate customers shortly that they need to prepare to migrate to the international standard that P27 is built upon,” says Pehrson.

This standard is called ISO 20022 and is a standardised format for electronic payment information. It is already used for European SEPA payments, but not in Sweden and the other Scandinavian countries, which have an older, local standards and a much more fragmented payments structure.

Those who need to prepare for this are companies that use payments via file transfer, that is, by grouping together many payments and sending them in an electronic file to the bank for payment on a specific date, such as when a company pays its employees’ salaries.

“Companies often manage their payments in their accounting systems, and in such cases it is vendors like Visma or SAP who need to prepare,” Pehrson explains.

ISO 20022 will be the standard for all payments on the new Nordic payments platform, regardless of whether payment is made via file transfer, an online bank, or Swish (or equivalent services in the other Nordic countries). But this isn’t anything the ordinary user needs to think about – the change will take place behind the curtains when the banks migrate to the new standard.

“We in P27 are laying down the rails that the payments will roll on,” says Paula da Silva. “It is then the banks that will provide the payment products to their customers.”

The first live delivery from P27 is planned to take place in early 2021, when account-to-account transfers are set to begin. This will be tested by the banks during the year, and SEB expects to be able to introduce the service at the end of the year.

What, then, are the advantages of going over to a new, harmonised payments infrastructure in the Nordic countries?

One clear advantage for the ordinary user is that, in contrast to today, it will be possible to make real-time payments directly from account to account, regardless of which bank the payee uses. And it will be possible to “swish”, or make account-to-account transfers, instantaneously in the entire Nordic region.

But there are also other effects with greater socioeconomic significance.

“For the banking system it will be a simpler and more robust payment system that entails lower costs both for the banks and their customers,” says da Silva.

“The harmonisation will also remove friction for trade between companies within the Nordic region and for international transactions to and from the Nordic countries,” adds Pehrson.

Another major advantage is that the new standard for electronic communication can handle considerably more information than today’s system. For example, account payments in Sweden today only allow 12 characters of information.

“In the future you will be able to provide much more information along with payments,” says Paula da Silva. “This means that companies’ payment reconciliations will be considerably easier. They will be able to receive information in real time from the payment system about exactly how many articles of a given product they have sold, and thus they will know when it is time to order more, for example.

“This will give companies a great opportunity to automate their processes and be more efficient. It will open up opportunities for entirely new services and allow society to become more data-driven.”