The Nordics: The Move Towards Cashless Societies and the Role of Mobile Payments

October 1, 2020

The recent months have sped up certain processes in digital and mobile payments across the world. With their individual societal and cultural characteristics, economic situation, and growth history, there’s no uniform way countries have reacted to the so-called new normal after the pandemic hit. In this article, we’re taking a closer look at the Nordics: Sweden, Denmark, Norway, and Finland, who have been leading the move towards cashless societies long before we heard of the coronavirus.

We’ll talk about:

  • The digital payment landscape until late 2019 in the Nordic countries
  • How the pandemic has influenced it
  • How the individual countries in the region tackle cashless and mobile payments 

Going cashless long before the pandemic

The Nordic countries have been leading the way in the global cashless transition. There were several main drivers of the change, including:

  • the emerging technology
  • changing consumer behaviour, with people wanting to have more options to pay and transfer money
  • new regulations like the European PSD2 directive.

At some point smartphones have become more popular than laptops, leading to the rise of the popularity of mobile wallets in mainstream payments. What was characteristic of the Nordic market was the massive popularity of peer-to-peer mobile payments, with credit and debit cards still dominating in-store payments.

But the shift hasn’t been exactly happening at the same rate throughout the region. 

Norway and Sweden have been at the forefront of the cashless revolution, with cash constituting less than 2.5 % of the total money supply. The biggest banks in Sweden have stopped handling cash, and so have multiple businesses, only allowing you to pay using your card or mobile phone.

But while Swedes and Danes used mobile payments to pay for public transport or donate to the church, 30% of Finnish consumers said they had never paid using their smartphones because of security fears about the mobile payment process. Compare that to the 80% of mobile bank customers in Sweden using mobile payments at least once a month.

The preferred payment method in e-commerce also varied across the Nordic countries. Norway and Denmark used more debit and credit cards to pay for online shopping while Finland chose direct online payments through their banks. In 2019, card payments were the top payment methods in Norway (85% of all transactions), followed by cash (9%) and mobile payment apps (4%).

As you can see, despite the relatively small size of the Scandinavian region with an overall population of just around 24 million people, the differences were significant. Although the growing popularity of mobile payments has been pretty much consistent.

The origins of mobile payments in the Nordics

The Nordics first introduced mobile payments in 2012 when six large banks in Sweden worked together to launch Swish for instant payments. With the popularity of card payments, the two main benefits of mobile payments were speed and convenience. Mobile payment apps turned out to be an easier way to pay when you didn’t have to enter credit card information and were already buying on your phone.

According to a survey carried out by Postnord, 72 per cent of Nordic consumers said it was important for them to have a wide variety of payment options when shopping online. And that included mobile wallets.

And so Scandinavia started to see a growth in mobile in-store payments, initiated by mobile wallets and by retailers’ native mobile apps. Interestingly, of the Nordic countries, Denmark is leading the way when it comes to using mobile payment apps in e-commerce. 

Today, the leading mobile payment apps in the Nordics, are (according to Statista):

  • Vipps mobile payments in Norway with a 78% adoption rate
  • Swish mobile payments in Sweden with an 82% adoption rate
  • MobilePay in Denmark and Finland with an 85% adoption rate in Denmark and 20% in Finland.

The apps have dominated their home markets, each one providing different business models for merchants. What’s also interesting about the market is that the leading mobile payments were initially driven by banks working together, rather than third-party providers.

Where are mobile payments headed to next

The numbers cited above picture the situation from before the pandemic. The Nordic countries not only differ in the adoption rate of digital and mobile payments but also in the way they tackled their response to the coronavirus pandemic in the first half of 2020. But one change that’s been seen consistently throughout the countries was the rise in contactless payments (influenced by the individual countries’ policies).

The social distancing measures caused a spike in the use of contactless payments in the Nordic region by 12 per cent – more than twice as much as in the same period of 2019.  

Denmark, which already displays the highest levels of contactless use, rose from 80.8% in week 11 to 83.4% in week 16 of 2020. Norway showed a staggering increase of 13.7 percentage points over the same period, from 45.6% to 59.3%. Sweden increased its contactless adoption from 47.4% in week 11 to 50.2% in week 16.

This has also meant a shift in mobile payments, although we’re yet to see the detailed statistics across individual Nordic countries. 

And just as it happened in other corners of the world, the pandemic has presented an opportunity to innovate for fintechs introducing new ways to pay to make people’s lives more comfortable and safer. For example, Swedish software company Datema launched an app allowing consumers to scan and pay for items on their phones, while also creating shopping lists, receiving offers and promos, and more.

A lot depended on government support, with Sweden being a prime example, having the government and central bank play a pivotal role in creating a near-cashless society. With all the benefits of digital and mobile payments like payment security and monitoring, national health concerns have become another important one during the pandemic.

Summing up

As we’ve already mentioned, the drive towards digital and mobile payments, not only in Sweden, Denmark or Finland but all around the world, is impacted by multiple factors. And the Nordics are a great example of how complex the topic is. 

Sweden is expected to become the first cashless society by 2023, and the whole system that exists and works there plays a huge role. 

But even within Swedish society, there are differences among generations and geographical locations. So it’ll be interesting to watch how mobile payment adoption grows and further spreads in the region, and what turns it takes in the individual countries. 

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