“There is no doubt that the strategic importance of payments has increased in the banks”

We had the chance to talk to Mr. Claus Richter from P27 Nordic Payments. Mr. Richter and his team are very busy making cross-border Instant Payments possible in the Nordics. He himself is already well known in the real time transaction world. Before he joined P27 he served for almost seven years as the Head of Transaction Banking Solutions at Nordea. He holds an Executive MBA degree from AVT Business School and a degree in Marketing and Finance from International Business Academy.

Good Morning Mr. Richter. You are COO of P27 and you work with your employees on a cross-border Instant Payments infrastructure. Why do you think Instant Payments will prevail?

Based on overall development in society in areas such as social media and mobile phones where everything is instant as well as IoT (internet of things) where instant is needed, I believe that Instant Payments is need to support those trends.

P27 is a joint effort by various Nordic banks. How did these financial institutions come together on this matter? What is the main driver for these banks to introduce such a service?

The background is multitude. First of all there were a number of local initiatives in Sweden and Norway on refreshing the clearing house and this combined with the strategic importance of payments in banking today was key reasons.

With P27 you will offer an infrastructure for at least three countries. In which form are you supported by the involved governments?
We have a very good dialogue with the authorities in all the countries. This goes for the financial supervisory authorities, the central banks as well as other authorities. They all seem supportive of P27.

Do the involved banks feel the competition from GAFA and Alipay?
There is no doubt that the strategic importance of payments has increased in the banks and they have become very aware of the GAFA’s of the world. This has clearly been one of the arguments for creating P27.

Banks in Switzerland see only investment costs and hardly any benefits. What can you say to this?

P27 is a very solid business case in its own right, but the strategic advantages of creating a place for collaboration on other payment related products is not to be underestimated.

It is also claimed that customers do not demand Instant Payments at all. Is it the same in the Nordic countries?

You can always discuss if it is a demand or something people pick up with a solution that is made available in the market. However, in all the Nordic markets P2P real time payments have become a huge success with the likes of MobilePay, SWISH and VIPPS.

In your opinion, do Instant Payments have the potential to challenge or even replace credit card schemes?

I think that Instant Payments for sure have the possibility to replace card payments domestically within a relatively short time frame. I think significant changes would be seen in the next 5-10 years in some markets. For payments outside your own country I think the time horizon is longer, and I would say that it is more like a 10-20 year horizon until we see that.

How do you see the development of Instant Payments in Europe and also in the world? Is P27 an open system, so that connections to other Instant Payments solutions such as e.g. SEPA Credit inst. can be made?

I see a significant global development in instant schemes. I think I have counted more than 60 schemes worldwide. P27 is for sure open to integrating with other instant schemes and are planning to be integrated with e.g. RT1 from EBA clearing.

I read that P27 wants to execute the first payment in 2021. From your point of view, what are the biggest challenges yet to overcome till then?

We have a couple of challenges left to overcome. They are mainly the regulatory approvals as well as making sure that the full banking community is able to get ready in time with all their changes as well.

Will P27 set upper limit amounts for transactions that are made instantly, how high will they be?

P27 as such will not set any limits, however, other parties in some of our markets have limits agreed, so this will vary from market to market.

As you probably heard of, banks in Switzerland, led by the Swiss National Bank, are also thinking of building an Instant Payments solution. What is your advice to your Swiss colleagues?

I have been in close contact with the initiative in Switzerland and I know they are very capable people so I am sure the progress is in good hands. My only advice would be to go for international standards as much as possible as it would ease future integrations.

Mr. Richter, thank you very much for your time.