# P27: What’s next for Nordic Payments?
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2020-03-04
Category: BANKING
Category URL: https://financedigest.com/category/banking
Meta Title: P27 Initiative: Revolutionising Nordic Cross-Border Payments
Meta Description: Discover how the P27 initiative is modernising the payment systems in the Nordic region to drive innovation, reduce costs, and improve efficiency.
URL: https://financedigest.com/p27-whats-next-for-nordic-paymentshtml

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_By **Peter Larsson,** Principal Solutions Consultant for Real-Time Payments, Covering Europe and North America, ACI Worldwide._

The Nordic region, which has some of the lowest cash usage levels in Europe, has long been a digital payments pioneer. However, compared to the strides being made on the domestic front, there has been limited progress on cross-border payments. As a region with high volumes of trade and tourism between neighbouring countries (18,000 Swedish workers commute to Denmark daily), it’s unsurprising that improving the cross-border [payments experience](https://www.financedigest.com/how-netflix-justeat-and-uber-raised-the-bar-for-the-payments-experience.html "How Netflix, JustEat and Uber raised the bar for the payments experience") and its efficiency is a high priority.

To that end, payment organisations in the region have joined forces to design two parallel streams to [address these local challenges](https://www.financedigest.com/rising-to-the-challenge-addressing-the-difficulties-of-pillar-2-reporting.html "Rising to the challenge: Addressing the difficulties of pillar 2 reporting"). The first was the creation of the Nordic Payments Council as a counterpart to the [European](https://www.financedigest.com/more-banks-join-european-instant-payments-pilot-from-end-2023.html "More banks join European instant payments pilot from end 2023") Payments Council, which is drafting the rulebook needed to align the countries. The second was the [launch of the P27 initiative](https://www.finextra.com/newsarticle/34553/nordic-banks-agree-funding-for-p27-cross-border-payments-platform).

**P27 as a response to Nordic needs**

P27 has been designed to solve the fragmented clearing and settlement environment that exists across the Nordics. While each member country has a different infrastructure, there are many [banks with operations across the P27 initial deployment](https://www.financedigest.com/banks-deploy-ai-3-major-technological-advances.html "Banks Deploy AI – 3 Major Technological Advances            ") countries (Sweden, Denmark and Finland) that are supporting technologies, rules and processes unique to each country. There is a critical need to modernise systems in line with regulatory mandates and reduce cost per transaction. Currently, this is often reliant upon correspondent [banking relationships](https://www.financedigest.com/building-a-relationship-led-bank-requires-a-more-human-touch.html "Building a relationship led bank requires a more human touch") processed over the SWIFT network.

P27 refers to the 27 million people living in the Nordics; despite tremendously high [digital payments](https://www.financedigest.com/digital-payment-tools-the-new-normal-for-charity-fundraising.html "Digital payment tools: the new normal for charity fundraising?") adoption, the relatively small addressable customer base does impact economies of scale. As a result, [banks are desperate to reduce their internal costs](https://www.financedigest.com/how-can-open-banking-help-smbs-navigate-the-cost-of-living-crisis.html "How can Open Banking help SMBs navigate the cost-of-living crisis? "), including operational overheads and compliance in order to release resources for innovation.

For this purpose, [the P27 initiative has announced](https://www.finextra.com/newsarticle/34553/nordic-banks-agree-funding-for-p27-cross-border-payments-platform) that sponsor banks have agreed on the necessary funding to commence the project build. The largest regional banks are the driving force, as it not only benefits their bottom lines, but also [drives growth](https://www.financedigest.com/how-embedded-insurance-can-drive-growth-and-value-for-the-insurance-and-finance-sectors.html "How Embedded Insurance Can Drive Growth and Value for the Insurance and Finance Sectors") for all banks who joins to participate.

When considered in a global context, this growth mindset and approach to [real-time payments](https://www.financedigest.com/the-role-of-invisible-real-time-payments-in-fueling-the-future-of-cx-in-business.html "The role of invisible, real-time payments in fueling the future of CX in business") (RTP) is innovative. Many regions lacking an RTP regulatory mandate, are searching for a margin in per-transaction charging. This is not realistic, especially in the consumer space, where people will not want to pay simply because a payment is faster. Therefore, margin will need to be found in value-added services built on [top of real-time payments](https://www.financedigest.com/top-5-payment-trends-for-2016.html "TOP 5 PAYMENT TRENDS FOR 2016").

**A growth** [mindset as a catalyst for change](https://www.financedigest.com/a-mindset-change-is-needed-in-the-financial-services-industry.html "A mindset change is needed in the financial services industry")

The Nordic approach recognises that a payment [type alone cannot be considered a competitive](https://www.financedigest.com/paper-recycling-market-competitive-growth-strategies-based-on-type-applications-end-user-and-region.html "Paper Recycling Market Competitive Growth Strategies Based on Type, Applications, End User and Region") differentiator. [The value comes from modernising the infrastructure that will allow for innovation](https://www.aciworldwide.com/insights/expert-view/2019/september/how-to-be-a-payments-trailblazer), while also maintaining the foundational services that all customers expect; security, availability and scalability. They also seek to improve the basics, such as the onboarding experience for both consumers and corporates. A significant part of this enhancement will come from the standardisation of the system across borders.

The [majority of global](https://www.financedigest.com/how-to-best-protect-assets-following-major-global-shifts.html "How to Best Protect Assets Following Major Global Shifts") banks are being challenged to evolve their legacy systems and architecture. Through sharing the cost of centralised payments infrastructure modernisation, the P27 initiative cuts the [individual load on each bank](https://www.financedigest.com/prime-bank-and-agam-spark-lending-revolution-for-individuals-and-business.html "Prime Bank and AGAM spark lending revolution for individuals and business"). At the same time, financial capital is released to address their internal [infrastructure](https://www.financedigest.com/integrated-finance-the-advantages-of-using-financial-infrastructure-as-a-service.html "Integrated Finance: the advantages of using financial-infrastructure-as-a-service") requirements. Larger [banks are currently maintaining separate infrastructures and adhering to individual rulebooks in each country where they operate](https://www.financedigest.com/stellantis-reshuffles-european-financing-operations-through-new-jvs-with-banks.html "Stellantis reshuffles European financing operations through new JVs with banks") – a costly process.

With P27, it is [expected that banks](https://www.financedigest.com/factbox-big-banks-expected-to-rack-up-more-than-1-billion-in-fines-for-whatsapp-use.html "Factbox-Big banks expected to rack up more than billion in fines for WhatsApp use") can simplify their technology stack and the associated overheads by condensing to a single infrastructure and rulebook. The scheme also aims to align its standards with those of SEPA to bring further consolidation benefits to Nordic [banks that are facilitating payments to Europe](https://www.financedigest.com/europes-banks-brace-for-russia-fallout-while-u-s-banks-see-limited-pain.html "Europe’s banks brace for Russia fallout while U.S. banks see limited pain"). Additionally, smaller banks are likely to see a cost benefit from the increased number of enriched [data payment](https://www.financedigest.com/understanding-the-realities-of-payment-data-monetisation.html "Understanding the realities of payment data monetisation") services that are provided by the P27 central infrastructure itself.

**Addressing multiple changes through digital overlay services**

The innovation in the Nordics is set to take inspiration from other advanced real-time and digital payment markets, such as India, and place a focus on [digital overlay services](https://www.aciworldwide.com/insights/expert-view/2019/july/how-upi-is-driving-india-shift-from-cash-to-digital-payments). It will, therefore, be very intriguing to see how the P27 initiative progresses plans for such overlay services.

Electronic invoices, which enable consumers to pay via [bank account](https://www.financedigest.com/lebanese-bank-closes-over-30-british-held-accounts-after-uk-ruling-depositors-group.html "Lebanese bank closes over 30 British-held accounts after UK ruling-depositors’ group") or with alternative payments like Klarna, are very common in Sweden. Through [leveraging digital overlay services such as Request to Pay (R2P)](https://www.aciworldwide.com/insights/expert-view/2019/july/european-banks-have-the-right-tools-to-stay-ahead-but-will-big-tech-overtake), electronic invoicing will increase further, resulting in additional improvements to the customer experience. [Historical trends](https://www.financedigest.com/acetylated-distarch-phosphate-market-comprehensive-shares-historical-trends-and-forecast-by-2027.html "Acetylated Distarch Phosphate Market Comprehensive Shares, Historical Trends and Forecast By 2027") indicate that digital overlay services would results in smooth adoption by consumer and merchant customers, suggesting that R2P could be a natural next step for the Nordics.

I’d also expect to see overlay services that address the multi-currency challenges of the region; a primary focus of the P27 initiative as the region looks to [move beyond](https://www.financedigest.com/the-high-fiber-feed-market-to-move-beyond-the-monotony.html "The High Fiber Feed Market To Move Beyond The Monotony") single currency schemes. From an adoption perspective, shoppers are most comfortable paying in their local currency and preferred method, so developing consistency across the Nordics in terms of real-time payments methods will [drive conversions at the point of sale](https://www.financedigest.com/baby-food-industry-will-turn-to-drive-sales-growth-of-functional-dairy-ingredient-market-fact-mr-report.html "Baby Food Industry Will Turn To Drive Sales Growth Of Functional Dairy Ingredient Market, Fact.MR Report"). [Accepting real-time payments](https://www.financedigest.com/why-ev-charging-stations-need-to-accept-open-cashless-payments.html "Why EV Charging Stations Need to Accept Open Cashless Payments ") in any Nordic currency, regardless of physical business location, would become a competitive differentiator for merchants.

The long-term success of P27 will go beyond just cost reduction on legacy systems and transaction pricing, in its ability to [drive revenue growth](https://www.financedigest.com/covid-19-is-impacting-the-variable-speed-drive-market-size-business-revenue-forecast-leading-competitors-and-growth-trends-2028.html "COVID-19 Is Impacting The Variable Speed Drive Market | Size, Business Revenue Forecast, Leading Competitors And Growth Trends 2028"). This [growth will arise from delivering new services for customers](https://www.financedigest.com/impact-com-fiscal-year-h1-2021-1-5b-valuation-150m-in-funding-bigcommerce-integration-69-customer-growth.html "impact.com Fiscal Year H1 2021: .5B Valuation, 0M in Funding, BigCommerce Integration, 69% Customer Growth") across the consumer, merchant and corporate space.


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