2021 Trend Almanac: Technologies and trends that will dominate the business and consumer landscape. Get instant access
Even before the pandemic, the banking industry was introducing products and services catering to digital-first customers. We saw multiple regulations and compliance standards such as ISO 20022 that were brought in to ensure safe, secure transactions. The pandemic and the resulting lockdowns accelerated much of this innovation in the payments landscape across Europe. Banks need to stay agile and quickly modernize their infrastructure to deliver customer priorities like last-minute billing and payrolls and improve account payables.
The next couple of years are expected to represent an important milestone in payment modernisation for the Nordics. Not only is the go-live of P27, the new cross-border Nordic Payments Platform, set to take place in 2022, but the Swedish clearing system Bankgirot will also be closing down several payment types such as salaries, invoicing, and pensions. This will trigger a migration of customers away from Bankgirot towards the more efficient, real-time clearing system of P27 that makes use of modern ISO 20022 payment standards.
A follow-up to the blog on the evolution of Nordics payments, this blog presents a concrete plan that outlines steps to be taken to embrace payment scheme upgrades in Europe.
There are four main areas affected by the impact of the current uplift for banks to manage real-time payment upgrade in the Nordics and Europe. These areas are:
The movement is now from mainframe to modular, which is the key to achieving success with P27. The first release of P27 is purely clearing of batch files containing payments for invoicing and salaries. Yes, it's a significant improvement, but it still represents the baseline of real-time. It is the first step followed by multiple releases such as request-to-pay, confirmation-of-payee, 2nd generation of direct debit, business monitoring, and a multitude of future overlay services.
The European Central Bank (ECB) is collaborating with Sveriges Riksbank to bring TARGET Instant Payment Settlement (TIPS) to support payment transactions across different currencies. TIPS is a service that settles payments in central bank money in real-time and around the clock. It currently supports the settlement of instant payments in euro, but also has the functional capability to support other currencies. TIPS will start to settle instant payments in Swedish kronor as of May 2022. This interoperability allows consumers to buy/transfer money to any Euro area country and the reverse direction, where a customer in the Euro area can transfer Euro in payment for goods in Sweden in the same way.
Looking further, Pay.UK is working to transform the way payments are delivered in the UK and, in time, it will bring all these products and services closer together. The initiative is to build the rails on which UK payments will move. Through infrastructure and services, Pay.UK enables £19.2 billion in payments every single day. Pay.UK is working with the Payment System Regulator (PSM) and Bank of England (BoE) to define the New Payments Architecture (NPA) and fundamentally redesign the country's payments systems to be launched within the next five years.
Real-time payments will benefit the banks, corporates, merchants, consumers, and society by:
SVP, Global Head, Banking & Financial Services, Virtusa
Amit heads the banking and financial services business globally for Virtusa with over twenty years of experience in advising BFSI and technology companies to drive digital transformation and accelerate revenue generation through new and innovative business models.
He is responsible for understanding Banking market trends and regulations while developing Virtusa capabilities to help our customers capitalize on these trends. He interacts closely with C-level leaders in financial services for key clients at Virtusa and sits on the transformation & governance board for strategic programs.
He loves writing blogs, articles, and reading banking journals and, also is a speaker on various industry platforms including SIBOS, IDC events, customer, partner, and analyst events.
Nordic Business Development & Pre-sales Lead
For the past eight years Peter has worked in the banking industry and supported business development of large banking solutions such as SWIFT, TARGET2, and Immediate Payments. Peter is responsible for developing business relationships with financial institutions and financial intermediaries in the Nordic countries (with a wider support for European and US market). Peter’s expertise lies in customer-centric sales and sales management, real-time and immediate/instant payments, transformation management from MT/MX and ISO, international payment systems, and clearing and settlement mechanisms. Most recently, Peter has been focussed on a cross Nordic payments clearing initiative, P27.
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