Interview with Nordea
Nordea is one of the founding members of the P27 program in the Nordics, how is this project progressing?
It is very much full steam ahead. We have an interim company established with the 6 banks in the Nordics and the vendor has been selected through an RFP process. We have also established the Nordic Payments Council, which is basically ensuring we have a common rulebook for instant payments across the Nordics. Therefore we are well on our way to delivering our first product set in Q1 2021. We will be using next year to implement the scheme and on-board the banks, with a full go-live in the first half of 2021. It sounds like a long way off but for such a significant change it is actually quite fast. It is not only the technical operation and delivery but also the governance at the same time.
How has P27 got around the issue of allowing third party access to a system that they didn’t fund or build?
We are making sure different participants can join P27 and for us this is key. 100% reachability across the Nordics is a fundamental aim. We are still working on the participation models but there will be a variety of options. Non-banks must have direct and indirect participation options to have access to the clearing system.
At present the ECB’s real time payments platform, TIPS is only for Euro denominated payments but there are plans for it to be multi-currency. How do you see P27 dovetailing with this once it allows for other currencies?
That is a good question. TIPS is currently a Euro-only platform and has around 10 banks at present. At the same time you have the EBA Clearing RT1 solution that has full reachability, and then we have P27. Interoperability across these platform is crucial, not just within Europe but further afield also. You will always have competing systems but the key is ensuring interoperability between clearing and settlement schemes. This is how we will address this issue.
The Nordics have often been seen as at the spearhead of innovation and digitalisation when it comes to payments and banking, why do you think this is and do you think it can be replicated elsewhere?
If you look at most people in the Nordics, they do not carry cash anymore. Mobile and card based services along with authentication through the BankID number provides a level of digitalisation that is already present and well embedded within the marketplace. The BankID rails are a huge advantage, we can authenticate not only payments but use it in other areas of life also. Acceptance of doing everything electronically is significant across the region. From a consumer perspective there is huge growth in digital payments and this is fuelling innovation. `We are also seeing more and more corporates moving in this direction also and demanding instant payments. P27 is therefore key. From a scalability perspective Nordic national individually are too small to do everything individually but we are stronger together. Whether this can be replicated elsewhere, I am not sure.
Nordea recently invested in P.F.C. (Personal Finance Co.), a “neobank” from Sweden. Why does the bank see investing in these organisations as important?
We are investing in more fintechs and neobanks, and we are doing this from a strategic perspective. These organisations are truly delivering innovation to customers. By investing in them, we are able to accelerate solutions to customers. At Nordea we think this is a cost effective and faster way to delivering value to our customers.
What else is in store for Nordea customers over the next year or so?
Frictionless payments are a big theme in the industry at the moment and we are looking at this for our retail and corporate customers. If the steps to authorise a payment are too cumbersome you will see less conversion rates. Also, we are looking to create frictionless integration with corporate ERP systems, we want to be able to integrate seamlessly with our customers ERPs and not have large technical investments on our customer side. We are also looking at being able to provide frictionless data aggregation services. One of the key requirements of our corporate customers is understanding and mitigating risk and we are looking into that also. We aim to be a provider of not only frictionless payments but also frictionless value added services.
Tino Kam, Head of Transaction Banking Solutions, Nordea