P27 isn’t only building a first-of-its-kind payments platform. The project also means confronting a number of never-before-seen challenges in cross-border regulatory compliance and coordination. Mathilda Stjernberg, P27’s Head of Compliance, offers some insights into the process and what lies ahead.
MS: As far as I know, no other Nordic financial market infrastructure company has built a new piece of financial infrastructure for payments from scratch and applied for a licence at the same time. And no other company has had such a complex constellation of agencies looking so closely at what they’re doing. We are really breaking new ground when it comes to regulatory compliance in the payments industry. And the expectations are, to say the least, very high for everyone.
MS: We submitted our application for a clearing licence in Sweden in October 2019. The application was more than 3,000 pages – and represented a huge milestone for P27. It was also historic for Sweden as it was the first payment infrastructure licence application submitted in 50 years for a new company.
MS: We hope and expect to get our license by the end of 2020. But it’s also important that the authorities feel comfortable and really understand P27’s operations and ambitions during the process that ends up to a license. To that end, we’re engaged in an ongoing dialogue that we expect will continue after we receive our licence and the actual supervision begins in practice.
MS: In addition to the FSAs, P27 also needs to have relationships with the central banks in the Nordics, both in terms of gaining authorization to settle in central bank money and in terms of being under their oversight in order to promote the stability of the payments market.
So before going live, we also need to be approved as members in the central banks’ payment systems. And submitting an application for that type of membership depends in turn on us being granted a clearing license. So, there are a number of dependencies at play at the moment, but everything continues to move forward according to plan.
MS: One of the biggest challenges of the whole process has simply been explaining the concept and vision of P27. Creating a cross-border clearing organization is really ground-breaking – which means it can take time to figure out which rules apply and how.
In addition, Sweden’s current legislation was developed in the 1990s, long before the era of smartphones and widespread internet banking. This creates some additional challenges for interpreting and applying these decades-old laws to a cutting-edge platform like P27.
MS: I feel like my role is to minimize the number of “unknown unknowns”. It’s not only understanding and dealing with the compliance risks that we are already aware of, but also anticipating and uncovering new and previously unknown compliance risks so we can start working to address them as well. We need to be proactive in identifying potential risks. It’s also important that we are on top of the rules and can demonstrate we know what needs to be done to maintain regulatory compliance.
MS: My weeks can vary a lot. I have lots of meetings where I give input or keep people updated on various processes. But I also spend time knee-deep in very complex analyses. I get to use expertise from my previous positions at Bankgirot and the Swedish FSA to analyse new developments and provide input on potential risks.
MS: By the time we’re ready to launch, we have to be certain that everything works perfectly. We must also demonstrate to regulators and our potential clients that we have a robust, secure platform that can perform in the way we’ve promised. Payments are like the economy’s circulatory system. If payments stop, everything else stops too. So failure is simply not an option.
Note: The official launch of P27 services is subject to regulatory approvals and therefore P27 will not conduct any business activities until required regulatory approvals are obtained.