P27 Nordic Payments - Your checklist

I will start this blog post by stating something obvious – the P27 Nordic Payments platform is on the horizon and will change how you and your company handle payments and account reconciliation. Maybe you have heard about P27 Nordic Payments but are not sure what it means in practical terms? Maybe you have not heard of it at all? Do not worry, in this blog post I will give you the details so you know what P27 is and what you can do to be prepared.

What is P27 and how did it start?

To put it shortly, P27 Nordic Payments was created jointly by the six largest banks in the Nordics (Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB, and Swedbank). It is set to replace the legacy payment infrastructure with 9 different clearinghouses in the Nordics to one single clearinghouse. A state-of-the-art payment platform that will make payments in the Nordics easier, quicker, and more cost-efficient. Your payments will no longer be cleared by local clearinghouses (such as Bankgirot) and instead, all your payments will be handled directly by the banks.

This new infrastructure will enable you to make payments to your suppliers in the rest of the Nordics just as easy as sending a payment locally within your own country and currency, in real-time and at a lower cost.

What does P27 mean for me?

Okay, so that is great news! Simple and more cost-efficient payments to the entire Nordic countries. We all love efficiency and especially cost-efficient solutions, but does this also mean that you must prepare in some way? Yes, and we will help you get there.

One reason why P27 Nordic Payments needs to become reality is that the current system is incredibly complex, and we utilize a wide range of different file formats depending on the type of payments. LB, KI, UTLI, SISU, BGMax are examples of file formats that are used locally in the different Nordic countries today, and all your payments and reconciliation processes need to be adapted to these. That might be fine if you are only dealing with local outgoing and incoming payments, but as soon as you add more types of payments it might be difficult for your ERP system to handle this. Maybe you have manual processes to handle these?

This complexity is exactly what P27 is set to simplify, and in the future, we will have one common standard across the Nordics. The files will be according to ISO20022 XML standard, a globally widely accepted standard where you will be able to add longer references. This is a development that will decrease the complexity for your organization in the long run as you’ll be able to improve your reconciliation processes, increase efficiency in the payments process, and collaborate better with suppliers and customers. In the short term, however, you need to ensure that you can handle the transfer to the new XML file formats.

If you currently have an established file communication directly with Bankgirot (BGLink) to connect to your banks, you will need to change this and instead establish direct communication to your bank. If you have multiple banks this means communicating directly with all those banks. It also means that you must change or make sure your ERP system is updated and equipped to deal with sending payment files in the new format and that it supports reconciliation with the new file formats.

So, a short, simplified explanation is: we will have one single clearinghouse instead of 9, we will change to a standard XML file format, we will need to communicate only with the banks, our payments and reconciliation processes will need to be adapted to the new file format and communication channels.

Checklist – Am I prepared?

So now we have established what P27 is and how it will affect your business, so I thought it would be worth going over some questions you should ask to make sure that you are on top of things for P27 Nordic Payments:

• Can your ERP handle outgoing payments with the ISO 20022 XML format? How about Pain.001?
• Can your reconciliation interpret account statements and reference materials in ISO 20022 XML format? And Camt052/053/054?
• Does your ERP support direct connectivity to the bank? 

If no to any of these three questions, see our recommendations at the bottom of this post.

Suggestions to prepare for P27 and file format change

At this point, I am happy to provide recommendations on how you can best prepare for P27. My first advice is to get in contact with Nomentia directly, we are more than happy to help you understand what needs to be done specifically for your business. All businesses are unique, with different banking and software ecosystems, so the level of adaption needed will differ.

Of course, there is also some general advice with actions you could start doing already now:

• Check if your ERP system supports communication in the XML file formats.
• Talk to your banks and see what services you will need to sign with them.
• Review how you want your payment and reconciliation processes to run in the future. Maybe there is an opportunity for automating your processes further.
• Think about how you want to connect to your bank or multiple banks. Can you get this bank integration from your ERP provider or would you want a dedicated service provider to provide you a multi-bank communication platform?

Do you want to avoid turning this into a complex ERP project just to have the right format? You can go to a dedicated service provider that can help you with file conversions. That way you let someone else help you transition, and your ERP can stay as it is.

At this point, it is also important to recognize that this will not all happen overnight and P27 is still pending regulatory approvals to start-up business. By 2021 the platform is scheduled to start operating side by side to the existing infrastructure which will be phased out incrementally. But why not be prepared and start getting the benefits right away?