Bankgirot has formed the backbone of Swedish payments and driven payment innovation for many years. This is set to change when P27, the new Nordic Payments Platform, is rolled out starting with SEK batch payments. We have put together a short guide to help you understand what is happening in the Swedish market and what banks should consider.

The field of play

First, let’s look at the different players and their role in the Swedish market:

• The Nordic Payment Council (NPC)
• P27 Nordic Payments Platform (NPP)
• Swedish Riksbank (RIXInst)

The newly formed Nordic Payment Council (NPC) is a non-profit organization responsible for the payment scheme rulebook for SEK and DKK. NPC is building the rails for a coherent Nordic payment infrastructure. All banks that want to use these rails need to be a member of NPC. You can register on NPC’s website, but remember banks need to have the full foundation in place and be ready to set a target date for starting to follow NPC schemes when you apply.

Moving to the next level of players, clearinghouses, or CSMs as they are called, will process and settle all payments according to the NPC rulebook. Both P27 Nordic Payments Platform (NPP) and the Swedish Riksbank (RIXInst) have stated that they will follow the NPC payment scheme rulebook and act as CSMs. Today we have nine different CSMs in the Nordics, so one objective of the whole project is to reduce the number of clearinghouses and simplify the payment infrastructure, as well as building a larger marketplace to keep up with International competition. In addition, banks and technology providers will need to collaborate to connect the technical parts and build superior end-user experience, as well as to create new service offers.

Up to now the million-dollar question has been whether P27 will acquire our old CSM - Bankgirot - or not. We now know that the answer to this is yes. Bankgirot’s services will continue to exist in some ways, but we need to track the effects of the integration in the long run. In addition, P27 doesn’t yet have a full clearing license from the Swedish Financial Supervisory Authority, “Finansinspektionen”, and cannot start payment processing until one is approved. Therefore, one hands-on piece of advice is to stay active in different forums to gather as much information as possible or get a consultancy partner to do this for you. Start now since time is running out and banks normally need lots of it to adjust to changes.

One thing that is clear is that to ensure success, all the different parties need to work in close collaboration, including banks and vendors. Each has their own part to play and challenges to overcome.

Decide what to offer

For banks one challenge is to understand what P27 means for the business. When developing a strategy to capitalize on P27, it’s important to keep in mind that banks can still choose which services to offer their customers. Therefore, it’s the perfect time to look at new value propositions and how to bring added value to payments. Despite the NPC rulebook covering extensive requirements, not everything will be mandatory. For example, banks are not obliged to handle all Nordic currencies.

Participating banks need a strategy setting out the services they want to provide, which communication channels to use, how to handle security and gateways, as well as reporting options. It’s important to make sure that new services don’t just comply with P27 but offer something extra to ensure market competition. This is also a unique opportunity to innovate and modernize your payments offering, so “If you’re in the business of making things, be in the business of making things great” as Disney CEO Robert Iger points out.

Changing payments

Another area set to change is alias payments, also known as OCR payments. This common, Swedish payment method uses a Plusgirot or Bankgirot alias connected to a bank account to make payments with high reconciliation. Once P27 is live these alias payments will need to be converted into IBANs when moving funds cross-border. This is needed in order to comply with the NPC schemes that are harmonized with international SEPA standards. Banks need to think about how they will handle this conversion.

With P27, the payer’s bank will need to validate OCR/RF references. Swedish OCR numbers will be mapped with a SCOR reference to again comply with NPC schemes that are built to resemble SEPA and the ISO Standard. Payments will be rejected if the SCOR reference isn’t correct. All banks will need to find ways to validate the SCOR to avoid payment rejections by the payee’s side. It will still be possible to set the hard or soft reference validation that exists today. However, it is up to the bank to decide whether they want to process alias payments in the new platform or not.

Things you can do now

The first thing a bank need to do is to build a strategy based on the products and services that it wants to offer and then try to leverage the opportunities brought by P27. Remember that each bank can choose their own path. Again, this is an amazing opportunity to build new innovative services, so don’t settle for less.

Here are three things banks can do now:

• Talk to your current IT-provider. How can they support you with the change to P27? What connectivity options, communication channels, security, file conversation possibilities are available to you? What will your onboarding plan look like? Make sure your vendor can set you up for future growth.
• Map all current payment flows and services connected to your customers. How many customers use specific Bankgiro services today and who are they? What will happen if this service is remove or modified? Analyze the importance of the services you provide now and those you want to provide in the future and add this to your payment roadmap, along with a strategy for when and how to launch new services. Analyze both happy and un-happy flows and how you will handle the flows during the transition period. Remember that NPC is not building technology or services, that is up to you.
• Apply for scheme membership with NPC through their member forum on their website. In order to apply you need to be confident that you have all technicalities in place, and you need to give a timing for when you can go live.

Big changes are coming up, but with planning and preparation your bank can leverage the opportunity of the new payment platform. How we perceive change can affect its outcome, so embrace it with an open mind and set your sights on success. If you have any questions on what to do next, feel free to reach out!