Small but mighty is one way of characterizing the Nordic countries when it comes to payments innovation.
Smaller countries in the region like Denmark, Finland and Norway, each with less than six million people, have been at the forefront of innovation in digital and mobile payments for decades, bypassing large economies like Germany (83 million people) and France (67 million) when it comes to the adoption of mobile payments.
Much of this concerns the banks in the region, which have joined forces over the past decades, investing in innovation and collaborating on various initiatives such as a debit card system, digital bank IDs and credit infrastructure. payment.
Governments have played a central role, participating directly or providing support to banks to stimulate innovation. Scandinavians also trust their governments, unlike other countries, and are ready to share information with them.
According to Claus Bunkenborg, CEO of Denmark-based MobilePay, these reasons explain why the Nordic region has been at the forefront of innovation in online and mobile banking, and later with in-car payments and contactless payments.
âMany prerequisites are already there, both on the infrastructure [side] and also in people’s minds, âBunkenborg told PYMNTS in an interview. âWe use very little cash, for example, and you’ll be hard pressed to find a store anywhere in the Nordic countries that doesn’t accept contactless payments.â
And with banks driving this innovation, building mobile payment systems was easy, using their real-time network rails to reduce costs and process transactions faster.
MobilePay, run by Bunkenborg, is a perfect example. Owned by Denmark’s largest bank, Danske Bank, the company was launched in Denmark and Finland as a peer-to-peer (P2P) service in 2013 and has grown into one of the leading mobile payment providers in the region.
With 4.3 million users (95% of the adult population) in Denmark and 1.8 million (roughly half of the adult population) in Finland, the mobile wallet company processes around 1.3 million transactions per day. , 45% of which goes to some 200,000 traders. who accept payments with MobilePay.
âWe’re the most loved brand in our country and the last app people want to remove from their phones. We are becoming an indispensable part of people’s daily lives, and this is a very strong position that we were very proud of, âsaid Bunkenborg.
Confront the global giants
Despite the company’s success in both countries, Bunkenborg said that “payments are a big business” and that it is not enough to be a local champion operating in a small country while competing against players. worldwide like Apple Pay, Google Pay and PayPal.
Seeking to grow further, the company launched a P2P service in Norway in 2015, but it didn’t work. “This market is really a market where everyone wins,” Bunkenborg explained, adding that there is a “ripple effect” where people tend to rally around a local P2P player.
This meant that the launch in Norway after mobile payment company Vipps had already established a presence there blocked any chance of success for the Danish company. But times have changed and the goal of entering the Norwegian market or taking on global players is now within reach.
In June of this year, three major mobile payment providers in the region – MobilePay, Vipps and Finnish company Pivo – agreed to merge their businesses, with the aim of creating “the best and most comprehensive digital wallet in Europe. And one of the largest banks owned mobile payment providers in the region.
The new entity will jointly serve 11 million users and more than 330,000 merchants in the three countries. While sharing the costs, they “will take all these synergies and reinvest them in further growth, because we want to expand not only in the Nordic countries, but also across Europe,” said Bunkenborg.
A Union of Internally Focused Countries
Another aim of the merger is to allow access to cross-border mobile payments between the three countries, which is lacking in the whole European region.
As Bunkenborg noted, âeven though European regulators want to harmonize payments in Europe, there are still many hurdles that we need to overcome before we can easily enable cross-border paymentsâ.
These obstacles, also present in the banking sector, are the result of regulation focused on the internal market in the region. – and even though several European initiatives try to harmonize payment infrastructures, âwhen you move up the value chain, things are still quite different,â said Bunkenborg.
For example, the European 14-wallet Mobile Payment Systems Association (EMPSA), which was formed in 2019 to ensure seamless mobile payments across the region, was unable to take off due to legal and technical challenges related to it. to the knowledge of your customer (KYC) and anti-money laundering rules (AML) which differ from country to country.
The association plans to strengthen interoperability and provide roaming solutions between participating payment systems, bringing together more than 70 million mobile payment users, more than one million merchant acceptance points and hundreds of European banks processing several billion transactions per year, according to information on the EMPSA website.
As Bunkenborg explained, unlike Visa or Mastercard systems which have a whole ecosystem in place with clear indications of the roles each plays in identifying customers and validating payments, there are between 20 and 30 wallets. different Europeans operating under different rules in the region, and bringing together, it will take time.
Combine online and in-store payments
Meanwhile, Bunkenborg said MobilePay will focus on exploiting the opportunities that the merger presents in the Nordic region. – while investing heavily in e-commerce, which is the area where they see the most significant growth driven by the pandemic and retail moving online.
In Denmark, there has been almost 100% year-over-year growth in this sector, he said. – and 50% of all e-commerce payments in the country are made through MobilePay.
This puts the wallet at the center of payments growth and innovation, making payments easier for consumers who don’t need to enter their card details every time they make purchases, and for merchants. who have seen payment completion rates improve when mobile wallets are used.
Another emerging trend they will focus on is the merger between online and traditional in-store payments, Bunkenborg said. Consumers shop in person with their mobile phones in hand, he noted, and in-store shopping experiences are increasingly digitized, with an increase in self-checkout driven by online payments. mobile phone and an increase in online payments in physical stores. .
âThis is one of our main areas of intervention, […] and with our user base and the market share that we have in online payments, this is a very good starting point, âhe said.