The Nordic Region is among the world’s most advanced and innovative economies. The region, consisting of Denmark, Finland, Iceland, Norway, and Sweden, is known for its high standard of living and advanced technological infrastructure. As digitalization continues transforming various industries, the Nordic payment markets are no exception. Several drivers are contributing to shaping the future of payments across Nordic markets. The crucial drivers include trust and collaboration among the stakeholders, banks and governments, with rapid payment technology advancement.
Presently the Nordic payment markets are evolving at a fast pace. With the rise of mobile payments, contactless transactions, and blockchain technology, the future of payments in Nordic Region is expected to undergo significant changes.
This article will explore the payment landscape in the Nordic Region, crucial drivers, emerging trends in payment systems, and the potential market future of payment markets.
What are the crucial drivers for innovation in the payment markets across the Nordics?
1. Less competition and more collaboration
Despite being small, the Nordic countries have learned to grow together. The Nordic governments have historically supported banks and other financial institutions by facilitating productive regulatory environments, which include sharing sensitive information. The region has traditionally enjoyed higher trust among individuals, businesses and governments.
Nordic banks, fintech startups and companies are showing good conduct against a highly competitive fintech market. For instance, Vipps from Norway and Swish from Sweden are prominent examples of a collaborative approach. Furthermore, Danske Bank developed MobilePay in Denmark, in which it partnered with the OP group in Finland and the consortium behind VIPPS in Norway to merge three mobile payment providers. Although the Danske Bank launched the solution, it worked as a partnership across Danish and Finnish markets.
2. Well-educated and tech-savvy population
Being digitally aware is the typical starting point for technological innovations. And the Nordic region has the upper hand in this. A well-educated and tech-savvy society that likes to try new things reduces the barriers to innovation. Having a digitally aware community gives more room for innovation. It provides the necessary human capital for research and development, and their skills enable them to adapt to new technologies quickly.
What are the emerging trends in payment systems?
- Adoption of new technologies & payment methods
In the Nordic region, 80% of payments are now contactless due to high levels of digitalization and a culture of innovation. The Nordic region is moving towards becoming a cashless economy. Due to the rise of alternative payment options, consumers’ payment preferences are shifting from cash & cards to other digital payment options. As a result of technological progression, Nordic consumers now have various payment options available to them. Here are some popular payment options available to Nordic consumers besides cash or credit or debit cards.
- Mobile Payments – Vipps, Swish, MobilePay
- Contactless payments – QR codes, Virtual Cards through NFC chip
- Digital wallets – Apple pay, Google pay, Samsung pay, Paypal
- CBDCs or crypto-based payments
- Account-to-account (A2A) solutions
- Buy now, pay later (BNPL)
- PIN on COTS payments
- Government initiatives
The governments of the Nordic countries have launched several initiatives to encourage the adoption of digital payment methods, including mobile payments and online banking. The latest initiative of Nordic countries is “Nordic Smart Government Program & Business (NSG&B)”, which aims to support enterprises by making real-time business data accessible and usable for innovation to create new business opportunities. The program was initiated with the support of five business registry authorities and several tax and statistical authorities in the Nordic countries.
As a part of this program, a framework is being developed for aligning digital infrastructure between businesses, service providers, and authorities. The NSG&B program enhances innovation and growth through the fair use of business data. Inter-Nordic trade accounts for roughly 20% of each country’s exports. Therefore, through this program, the Nordic countries want to make it simple to send and receive e-invoices and e-receipts between businesses, aiming to simplify the delivery of digital services in other Nordic countries.
- Customer-centric approach by local banks
Banks in the Nordic region have been instrumental in driving innovation and growth in the payments market through their customer-centric approach. By placing the needs and preferences of their customers at the forefront of their operations, banks have been able to develop and offer a range of innovative payment solutions, such as mobile payments, instant payments, and e-invoicing. Additionally, banks in the Nordic region have been at the forefront of collaboration and partnerships, working closely with fintech and other players in the payments ecosystem to deliver a seamless and efficient payment experience for their customers.
Future of payments in the Nordics
For a future-proof payment ecosystem, making decisions based on a deep understanding of the payment environment is imperative. The Nordic payment ecosystem evolves rapidly by establishing and maintaining collaborative relationships with innovative partners. The Nordics have constantly been implementing creative solutions to provide better payment options to consumers.
The advent of blockchain-driven payment solutions and IoT smart automation tech in payments banking are providing a rich hunting ground for the next generation of innovations. New use cases like voice banking and crypto-based payments will likely become prominent across the payment management space.
Furthermore, a joint initiative, P27, has been put in motion by Danske Bank, Handelsbanken, Nordea, OP Financial Group, SEB and Swedbank. P27 aims to build a pan-Nordic payment infrastructure for real-time, cross-border payments in multiple currencies. It aims to develop common Nordic payment standards and improve the cross-border payments customer experience across the Nordic region.
With all these developments in place across the Nordic region, the payment ecosystem will experience a revolutionary change allowing all the stakeholders to add value to customers. Not only this, it will support Nordic banks, governments and businesses to build distinctive solutions for customers.