P27 and the Future of Cross-border Payments in the Nordics

Cross-border payments might soon be as easy as sending a text message. As incredible as it sounds, banks and governments are already working to make this a reality. The P27 initiative in the Nordic region is one such example. It is a pan-Nordic payment system that will enable instant payments (domestic and cross-border) in the Nordic currencies and the Euro. Instant payments have become a huge draw, given how quick and easy they are. But more innovation is sought. A recent survey by PwC found that 42% of respondents feel strongly about speeding up innovation in instant B2B and cross-border payments.

Why the big deal around instant payments in Europe?

Changing consumer habits have made instant, on-the-go payments highly popular. Mastercard found that 93% of people are keen to use digital payments that are touch-free and instant. And this expectation is rubbing off on B2B payments as well. In fact, real-time B2B payments will double in 2022, according to PYMNTS. SEPA in the EU, and Faster Payment System in the UK, are real-time payment systems that are active in Europe. Other instant payment platforms are expected in Europe over the next few years. TARGET Instant Payment Settlement (TIPS) is an initiative by the European Central Bank that allows instant payment transfers around the clock every day of the year. It aims to improve reach and interoperability between instant payment platforms. As of now, TIPS settles payments that are in only euros. Based on demand, this will include other currencies from Europe and elsewhere. In fact, from May 2022, TIPS will accept payments in Swedish krona. On the other hand, the European Payment Initiative (EPI) is focusing on creating a common card and e-wallet product for the entire EU. The premise is that users should enjoy the same payment experience, regardless of where they are in Europe.

What is the P27, and why does it matter?

P27 is a pan-Nordic payment system that will process domestic and cross-border payments in real-time, in the Nordic currencies and the Euro. Initially, the platform will support instant payments between people and businesses within the Nordic region. The project is a joint initiative by six large Nordic banks to make cross-border payments more efficient and harmonized. Currently, it is undergoing regulatory approvals. Once it goes live, P27 will be the world’s first real-time, cross-border payment system in multiple currencies. P27 will align its standards with those of SEPA so as to bring further harmonization to the European payments landscape.

Why the Nordic region?

The Nordic countries have high internet and digital banking penetration. They are much ahead when it comes to consumer readiness and digital savvy. They have an evolved open banking framework, which makes instant payments possible.

How will P27 work?

P27 will enable real-time, batch, domestic and cross-border payments to be processed quickly and at a low cost on a secure platform. It will use the latest ISO 20022 messaging standard, thus enabling the richer exchange of data. Businesses and consumers will be able to make real-time, cross-border payments to one another. The platform will support real-time payment clearing and account settlement, regardless of currency. It will also help participating banks to work with one another more seamlessly. And compete in an innovation-driven payments space, which is seeing more global tech players come in.

How will P27 help merchants?

Quick, easy settlements
P27 will enable merchants in the Nordic region (and eventually in Europe) to make cross-border payments in real-time. Banks will be able to clear payments several times a day, every day of the year, round the clock. This will enable merchants to settle payments on time and better manage cash flow and liquidity.

Harmonization in payments
P27 will use the latest ISO 20022 messaging standard, allowing richer data transfer. This will help in easy reconciliation, saving time and costs. P27 will align with SEPA standards to improve interoperability. Because many countries will use the same standard and rules, payments will be more seamless.

Create new digital supply chains
The P27 platform will create new digital supply chains by linking users, merchants, banks, and fintech players directly to the platform. This will enable fast, secure, and smooth data flow between all parties. Merchants (and other players) can embed payments into their digital experiences to make them more immersive, thus spurring innovation in products and services.

Final Thoughts

Real-time payments will become the norm as we move ahead. And new innovations and policies will pave the way for this growth. What we will need is more interoperability between payment systems. With P27, we are seeing a new standard in cooperation and innovation. A new era of connectivity and payment efficiency. And as more Big tech players and fintech companies join the fray, we can expect that there is a lot more to come. To know more about P27, you can head over here.

Jose Augustine

Jose Augustine is the Chief Business Development Officer at Novalnet with extensive experience in European payment industry and a knowledge powerhouse.