How TARGET Instant Payment Settlements are transforming Cross-Border Payments in the Nordics
The future of cross-border payments is an exciting one. As globalisation drives volumes of cross-border payments, the provision of real-time, friction-free cross-border capabilities will prove important for banks looking to win customers, improve loyalty, and generate reliable revenue streams. To address this we've collaborated with Volante Technologies to host a Fireside Series on Cross Border Payment Innovations. Kickstarting the series with a Nordic focus, Peter Larsson, Business Development Director at Volante Technologies sat down with Thomas Bo Christensen Director of Payments Centre Excellence at Danske Bank. Here's a sneak peek of that.
Peter Larsson: Can you share your views on the current market trends and challenges of delivering real-time payments for customers?
Thomas Bo Christensen: There are two main trends right now. One of them is
standardisation and the other one is a huge growth in instant payments. Both held by the European scheme. In Denmark, Sweden, and Norway, instant payments have grown since the first mobile payment has been introduced. In Denmark, we have had the instant payment scheme for 8 years now. Like that, we can transfer money instantly with the limit of 500.000 coronas. This is also connected to the decommissioning of using checks in Denmark. We don't use them anymore. We use them only for travel purposes. Currently, we are still looking into increasing the maximum amount that can be transferred instantly.
Peter Larsson: In the North, we are used to having frictionless payments, at least for domestic payments. (i.e. Target Instant Payment Settlement aka TIPS). What is the perception or expectation of TIPS for your bank?
Thomas Bo Christensen: In some countries, we already have instant payments. Like in Denmark or in Sweden. Looking at TIPS, we see it as another alternative, because all the current instant schemes are settled in Central Bank money, so having the TIPS in the Nordics will be another mechanism for existing transactions and can be used as an alternative. We will see TIPS in Sweden the next year and we will see them in Denmark in 2025.
At the same time, we see that the European Central Bank, the Swedish Central Bank, and the Danish Central Bank have launched an investigation into how it is possible to make TIPS with some sort of currency conversion on the way.
I am excited about what will come up from this investigation. We didn't hear anything so far. The issue they are looking for is how to do the currency exchange. I have my doubts but is going to be exciting. Potentially, we are also going to see some kind of solution coming from P27.
Peter Larsson: Within the Nordics, there is a great number of Swiss commuting to Denmark for work and Danish who own properties on Sweden. It's going to take time to have that service active, but do you think the launch of TIPS and the bank becoming direct participants is a better alternative?
Thomas Bo Christensen: Timing is essential here. We know Sweden will join TIPS next year and we know Denmark will join TIPS in 2025. We don’t know when Norway will do it, but probably around 2025 - this is my best guess - maybe 2026. But for people to use these services, it requires that all the central banks are hooked up to TIPS. Or maybe we are going to see a solution provided by P27 before them allowing the cross-country conversion and transfer of money.
It is going to be exciting to see who we will be there first, or maybe we are going to see a combination of different solutions. Also, because we are not sure when and if the Norwegian community will join P27 or if the Norwegian Central Bank will join TIPS.
To watch the full Fireside Chat: CLICK HERE
About Peter Larsson
Peter Larsson is the Business Development Director & Payments Expert (for the Nordic countries), at Volante, supporting many European Financial Institutions, PSPs, Central Banks, Central Infrastructures, in the Instant Payments field, in the Real-time Cross-Board Payments, Liquidity and Settlement Management, and any to any payments (payments Hub), helping the Industry building a sustainable Business Case and a competitive Business model.
About Thomas Bo Christensen
Thomas has vast experience within the payments and securities settlements areas covering strategy inception, solution delivery, and customer interaction. His knowledge covers payments strategy and infrastructure, Securities settlement systems, Strategic planning, or change management.
As Director at Danske Bank, he is involved in all aspects of payments-related issues: Strategy, P27, Central Bank payment systems, Instant payments, Digital currencies, SWIFT. He represents the Danske Bank and Danish Financial Industry in European Payments Council and Nordic Payments Council.
About Volante Technologies
Volante Technologies is the leading global provider of cloud payments and financial messaging solutions to accelerate digital transformation. We serve as a trusted partner to over 100 banks, financial institutions, market infrastructures, clearinghouses, and corporate treasuries in 35 countries. Our solutions and services process millions of transactions and trillions in value every day, powering four of the top five corporate banks, 40% of all US commercial bank deposits, and 70% of worldwide card traffic.