Strong Local Trust in Nordic Wallets and Banks Is Moat for Big Tech

Most Nordic countries have at least one nationwide payment scheme to which all financial institutions (FIs) are party. The idea is that a common rule book and shared messaging standard will facilitate payments between any two banks regardless of their unique internal systems.

But when it comes to cross-border, multi-currency payments, the same degree of interoperability has yet to be achieved. This is the reason why at the EU level, the European Central Bank, European Payments Council, and other international bodies are working to upgrade existing rails and bring more efficiency to cross-border payments.

While such schemes are by default focused on euro payments, other schemes are gathering pace in sub-regions across the continent.

In the Nordics, banks in Denmark, Finland, Norway and Sweden have come together to form the Nordic Payments Council (NPC), an organization responsible for driving the integration of payment systems across the subregion, where four different currencies — Danish krone, Norwegian krone, Swedish krona and euro — are in use.

According to Camilla Åkerman, the NPC’s secretary general, the Nordics are very open to new technology and favor collaboration when it comes to problem-solving. Accordingly, when banks came together and discussed “how can we harmonize our payment infrastructure in a good way,” it triggered an idea to form a single clearing platform for the three currencies that was also interoperable with euro clearing and settlement mechanisms.

Read on: How Nordic Payments Megastructure Can Drive Greater Regional Integration, Harmonization

The result of that discussion was the formation of the ambitious P27 initiative, which aims to establish an integrated Nordic region and common infrastructure for domestic and cross-border payments in multiple currencies.

And while P27 awaits regulatory approval to go live, the work of upgrading existing infrastructures and migrating payment systems to the new platform has already begun, Åkerman told PYMNTS in an interview.

On the topic of financial authorities, she said that there too, the Nordic countries are technologically progressive and have embraced digital payments in a way that makes the Nordic banking community “quite free to develop” using the regulatory framework designed for FIs in the region.

But although the Nordic payment ecosystem is a world leader in digital payments, Åkerman noted that beyond payment schemes, there are other areas within the banking sector that could benefit from further digital transformation.

“For example, when reporting suspicious payment transactions,” she said, adding that the same standardization that has enabled digital payment schemes could also be applied to automate a greater range of extra-transactional processes.

Real-Time Mobile Payments

In this age of convenience and instant gratification, both consumers and businesses increasingly expect real-time, frictionless payment options to be the norm.

And that is one of the goals the P27 project is looking to achieve by facilitating transactions across borders and integrating with the Single Euro Payment Area (SEPA) instant rails to enable real-time payments across Europe, Åkerman explained. This Is even more crucial for the Nordics which are very dependent on the import and export of goods and services.

Related: EU Eyes Requiring PSPs to Offer Instant Euro Payments

Read more: Deep Dive: What The US Could Learn From The Nordics’ Instant Payments Ecosystem

However, the technical development of payment rails is only half the story, she pointed out, adding that individual banks also need to increase their capacity to be able to support 24/7 instant schemes.

What’s more, Åkerman said that building the kind of trust in the system that domestic instant payment schemes have will also take time before they are widely adopted by businesses.

But some progress is being made, as two of the most trusted payment systems and bank-owned wallets in the Nordics, Vipps and MobilePay, recently received approval from European Union authorities to merge their businesses and further boost payment integration in the region.

Learn more: EU Approves Merger of Nordic Mobile Payments Firms MobilePay, Vipps

For Åkerman, trust has played a key role in the success of such projects. “We have a lot of trust in the financial system in the Nordics,” she said, giving Nordic bank-operated mobile payment systems a competitive edge over Big Tech wallets.

See also: Vipps CEO: Intense Competition From Big Techs Keeps Nordic Payment Firms On Their Toes

This means that for the likes of Google Wallet and Apple Wallet to see widespread adoption in the Nordic region, “they [would] need to prove themselves before much will happen,” she added.

For all PYMNTS EMEA coverage, subscribe to the daily EMEA Newsletter.