Frontpage News 2013 Digital motorway p...

Digital motorway project to 250m DKK

28 October 2013

​The banks modernise the large and robust systems that send money around in the Danish society. In November, a milestone will be passed towards a modern payments infrastructure. 
In daily life, we do not notice that they are there, but we all use them. When we go shopping, pay subscriptions to the football club or withdraw money from the ATM. We do not see the movements from account to account, but we trust that the money is always where it should be.

And it is, thanks to the digital motorways which constitute the payment infrastructure in Denmark. It is the banks that are behind the large and robust systems that send money around in the Danish society. The payment infrastructure handles all retail payments, such as account transfers and Dankort transactions. In 2012, the average daily value of settled payments was 24.4bn DKK.

There is a constant need to update and modernise the payment infrastructure. This aspect is not only about security, it is also very much about being able to meet the Danish population's needs and expectations. And the faster payments are settled, the greater the requirements are for the systems that manage and secure the payments so that the citizens are protected against abuse.
In November, we will be in the third stage of modernisation, where the new thing will be that the Danes will get the possibility of same-day settlement of account-to-account transfers on banking days. When the entire modernisation project is completed in late 2014, the Danish bank customers will have the opportunity to send money to each other within a few seconds, seven days a week, 24 hours a day. For security reasons, and because the change affects so many systems and players, it is not possible to get there at once.
The previous stages have particularly been gaining for the Danish businesses since the weekend’s credit card payments since May 2012 have been deposited into the businesses’ accounts on Monday morning and not on Tuesday as earlier.
Executive Director of the Danish Bankers Association, Michael Busk-Jepsen, points out in this connection that the banks, with the modernisation of the payment infrastructure, continue a well-established tradition of ensuring effective digital payment solutions that meet user needs.

Denmark’s Central Bank at the top of the table

The modernisation project is a very large project for the banks, and it is done in close collaboration with Denmark’s Central Bank. The project involves an investment of around 250m DKK for the banks. Behind the project is a long-term process under the auspices of Denmark’s Central Bank’s working group on the domestic payment transfers under the leadership of Governor Hugo Frey Jensen. It included additional representatives from Denmark’s Central Bank, the Business and Growth Ministry, the Modernisation Agency, the Danish Agency for Digitisation, the Danish FSA, the Consumer Council, the Danish Chamber of Commerce, Nets, the Danish Commercial Industries Federation, and from the Danish Bankers Association. The project follows the recommendations from the IMF and is based on international standards to future-proof the infrastructure.
There was consensus in the working group that the modernisation solution, that the banks are now implementing, meets the group's recommendations. 
The initialisation of same-day transfers has required extensive and coordinated efforts on the project across banks, data centres, Denmark’s Central Bank and the supplier (Nets) - there is a change of about 100 systems which is equal to the number of banks (including Denmark’s Central Bank) in Denmark. 
The goal is that the client can both move his money just as he moves a document around in his own computer, but also further out to other computers via the Internet. But unlike when you send a document via e-mail, there is no guarantee that the document appears. And there is no one who keeps an eye on whether it shows up. It is not like that with money. It must always show up, and the banks must always know how much money there is in the system.
According to Department Manager of Denmark’s Central Bank, Kristian Kjeldsen, it is essential to ensure a modern and secure payment infrastructure, which is in line with user expectations for faster remittances, and he points out that the banks, with the introduction of same-day transfers, have taken an important step in the direction of achieving these conditions.


With the ability to transfer money within the same day, banks can offer a service to handle payments that are time-critical. When you stand as a customer and need to pay quickly, it is now possible to transfer money to the recipient on the same day.
For businesses, there is also a gain in same day transfers. First, businesses get their money faster than they do today. That itself ensures easier and faster access to the liquidity of the business. Secondly, they get better security for money transfers. The businesses will first have security for their payments when the money has been transferred through Denmark’s Central Bank to the recipient's account. Then, they have the case of finality, and the shops and businesses are sure that the transfer has gone through. With the new way to transfer money, shops will quickly get security for their payments.
The issue of security is particularly relevant for businesses that sell large consumer goods, such as car dealers. If a customer wants the car right away, the dealer must have the collateral for the money right away. Today, it will take at least one banking day before the dealer can hand over the keys. After November 2013, the dealer can get his money a few hours after the deal is made. This means that the customer can get the keys to the car the same day. When the project of modernisation is completed, the dealer can get his money after just a few seconds.
Both same-day payments and immediate payments are competitive products, and therefore it is up to the competition to price the product. It is already happening in other countries in the same way. 
With the modernisation project, Denmark is on par with countries that offer the best payment solutions. It is hard to do it much faster than real time

Facts: They money’s way in the system 

On the way to the recipient's account, the money goes to Denmark’s Central Bank, where it is transferred from the sender’s to the recipient's bank before the money can be released to the recipient. It is necessary to eliminate the risk that banks build up against each other when customers transfer money. Basically, the recipient's bank cannot release the money to the recipient until it has received it from the sender's bank. This is because the receiver’s bank, in the case of the sender’s bank's bankruptcy, will lack the money if they released it to the recipient, because the recipient in the meantime may have used the money. In this way, the banks ensure that the money always follows with a payment all the way from sender to receiver, and thus there is not credit risk in the payment infrastructure. This helps to ensure a stable infrastructure that will benefit all.
In order to maintain an infrastructure where the transfer of money takes place without credit risk, it is necessary that the banks, on every banking day, sets aside liquidity for the payment infrastructure in Denmark’s Central Bank. Denmark’s Central Bank has, for the modernisation of payment systems, further developed the facilities used by the banks. This modernisation means that workflows for banks around liquidity have become more automated, and it provides more opportunities to choose automated solutions to allocate the correct amount of cash. With the new reservation facilities, Denmark’s Central Bank contributes to support a more secure and stable infrastructure for the transfer of money.
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