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How will P27 impact the payment landscape for businesses? Find out the new opportunities.

When P27 goes live the Nordic payments market will be shaken up once again. Getting a head start could give your business a strategic advantage over your competitors. But where is the ROI?

Jarkko Turunen / May 27, 2021

When SEPA was rolled out, many believed the changes would be inconsequential. However, the initiative led to new opportunities and considerable savings for businesses and banks. Now that P27 is following a similar path, I explore the potential impact and opportunities of P27.


Payment simplification with ISO 20022


When P27 Nordic Payments Platform goes live there will be a change from domestic clearing to Nordic clearing, which will see local formats, such as LB, KI or other bank-specific formats, replaced with ISO20022. It may be difficult to see an immediate return on investment. However, over time, I believe that the move to standard ERP and payment processing software to automate payment processes, will benefit businesses. Cost reduction is likely to be seen in the form of payment processing, and businesses will be able to reduce payment handling times – focusing on core business activities instead.


Global harmonisation


For businesses with a global customer and supplier base, P27 Payments Platform can create new opportunities in processing domestic and Nordic payments and collections. With the ISO20022 format, they will be able to leverage existing services throughout Europe. Consolidation of payments and collections will be simplified and businesses will no longer have to rely on different processes and software in different countries. As more regions around the world move to ISO20022, these processes can be further aligned.

Furthermore, with standardized formats, competition is likely to increase as ERP vendors will not have to implement country-specific formats. This also creates an opportunity for vendors to offer their services in new markets and reach a new customer base.


Reduced system maintenance costs


Companies operating domestically in a Nordic country will probably have to make considerable changes to their payable and receivable systems and operations, since they are most likely supporting local formats like LB, salary and other respective local reporting formats. A system upgrade may be due, or a payment and statement format conversion will be necessary if a system upgrade is not feasible due to the timing or costs.

Opting for a conversion approach may result in a loss of benefits and even the requirements of using the extended data, such as ultimate beneficiary. Again, despite the work that needs to be done in the timeframe, I believe that moving into standard formats and processes will, overtime, reduce operating costs for companies.

Read also: First P27 services coming on line – Guide for banks operating in Sweden


Reduced number of bank accounts


For businesses with suppliers and customers across the Nordics and beyond, the value of P27 for supplier payments and collections will increase significantly. Supplier payments can be made from a single account across the Nordics and Europe. However, since currency conversion will may remain, it may be beneficial to hold accounts in different currencies.

When it comes to receiving payments, one account might be sufficient. However, based on conversations with our Virtual Account Management (VAM) customers, there is evidence that paying to local account is still preferred by many.


New standard payment capabilities


I also expect new services to emerge thanks to P27. This includes salary, single and total booking services, remittance information and reconciliation services, handled by banks or 3rd parties. All of the services can be reused for ISO 20022 based payments such as P27 or SEPA, enabling standardized services regardless of payments and country.

Looking at salary payments, the way of sending the salaries to banks will change dramatically. In Sweden, for example, salary payments are currently sent to Bankgirot, but as P27 goes live, the service is expected to close. This may lead to the emergence of new salary service providers.

Additionally, central P27 proxy services could evolve. This will impact how a customer is identified through multiple IDs. If a bank is a member of P27, SEPA and Straks payment systems, it could reach a user through any of the systems across the Nordics.


Real-time payments


Benefits can also be found in the move to real-time payments. In short, businesses will be able to get funds in real-time from their clients and pay in real-time, giving them instant control of their financial situation – which is empowered by modern, real-time accounting system.


Request to Pay


Looking further into the future, request-to-pay and related invoicing services can bring vast benefits to businesses in the Nordics by automating collections processes. Learning from similar services in other markets, we have seen that certain customers will pay earlier when prompted on their phones, so there is potential for reducing working capital with request-to-pay.

Request-to-pay can create a unified way of paying for payments. For utility-types of payments it’s important that characteristics similar to direct debits are available. This offers an opportunity for businesses who don’t see SEPA Direct Debit as a suitable alternative for their business model.

With request-to-pay going live in P27, it will be less important to know what the account number looks like, and hence, the need for having local accounts will reduce over time. Nevertheless, currency conversion must be considered.

Read also: Who benefits the most from Request-to-Pay?


Scale of economies and cost savings


All in all, there are plenty of benefits from P27 for businesses of different sizes. When the payment volumes are combined into one Nordic payment platform, the economies will scale, and the cost of payments will go down.

Banks can start bringing these benefits to their business clients by implementing P27 into their infrastructures. For further information on how we can support your bank in the P27 journey, feel free to reach out or learn more on our website.

Jarkko Turunen
Head of Payment Products & Services, Tietoevry Banking
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