P27 – An opportunity to innovate for the Nordic banks

Published: March 17, 2019

For a long time, the Nordic region has been viewed as one of the most advanced payment products and solutions markets owing to its transparent culture of co-operation. Even amid the rising wave of standardization and harmonization of payment infrastructures across the globe, the Nordic banks continue to be the front-runners with their latest endeavor - P27.

P27 is a business-driven future-proof initiative formulated by seven major Nordic banks to modernize, integrate, and harmonize the highly fragmented Nordic payment infrastructures. The initiative is intended to foster a culture of healthy competition for the Nordic banks to be able to deliver innovative products to their customers. Just like the 2012 Swedish Swish initiative, it will not only enable them to compete among themselves but also with the new entrants in the payments market

According to a Bloomberg report, P27 will soon dramatically speed up international transfers in the Nordic region. However, P27 will only create the foundation for innovation; not much of innovation will be fostered by the infrastructure alone. Hence, the question arises whether the Nordic banks are ready to leverage the strengthened foundation to develop new products and services in line with present-day requirements and demands of customers.

While innovation cannot be optional, and it must continue beyond P27, the current circumstances are stifling the innovative mindset in the region. Banks are currently entangled in the cobweb of payment infrastructures and the rulebooks surrounding these. This must, however, not be used as an excuse to not innovate.

We must understand that the ability of banks to maintain their competitive edge will depend entirely on their capacity to adapt and innovate. If the trend of negligence to innovate continues, a tsunami of new entrants (which have already started disrupting the market with their innovative products) riding on a wave of technological advancements will grab large portions of market share from the banks.

As reported by Reuters, the recent regulatory changes in Europe has opened up sections of the market to players that were not traditionally part of the industry, such as Facebook and Amazon, triggering more competition for traditional players. In such a scenario, banks will end up in a not-so desirable situation (of being labelled as payments infrastructure providers).

In conclusion, it is important to accelerate innovation efforts in accordance with the currently available infrastructure. P27 should be considered as one of those transformation journeys in progress, intended to foster healthy competition, rather than one where the destination has been reached. Notably, customers are already taking unified payments infrastructures for granted because of SEPA, SEPA Instant Credit Transfer, and other similar initiatives.

While a laser focus on building a harmonized payment infrastructure is important to strengthen the foundation, the only way to create new revenue streams and secure market share is to delight customers with new payment products and services - powered by innovation.

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