Online retail in the Nordics: which payment options to offer

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Author: The Market Intelligence Team, Trustly

When you think of the Nordics, perhaps high taxes, sleek Danish design or Swedish meatballs come to mind. But what people foreign to the region might not realise is that the combined markets of Denmark, Norway, Sweden and Finland are in many ways leading the world in payments innovation.

The region’s FinTech preeminence, in large part due to smart government policies, access to venture capital and a tech-savvy talent pool, is also apparent in its consumers’ progressive payment preferences.


This article will help you to understand which payment options to offer when launching in these markets.


The state of payments in the Nordics


If you spend a few days in any of the Nordic countries, you’ll quickly notice that many establishments are “cash-free” — a stark contrast to many of the “cash-only” spots in the US. In Sweden, a country where one of the world’s first ATMs was installed, a cashless society is an almost imminent reality. In fact, in 2015 cash and coins comprised just 2% of the country’s economy.


But it’s not just offline payments that look different in the Nordics. Online, while cards are the primary method of payment, alternative payment methods are widely popular.


Below is a graph representing how consumers in the Nordics prefer to pay.

Nordics Customer payment preference

While on average 22% of Nordic consumers prefer to pay by online banking payment, in Finland that number is as high as 40%, making it the leading payment method. Its popularity can be attributed to two main factors: the Finns trust in banks and the security of the payment method due to strong electronic identification authentication.


Considering that 34% of Swedish consumers abandoned a purchase because their preferred payment method wasn’t available, a checkout offering only the option to pay by card is simply incomplete. When it comes to ecommerce in the Nordics, there’s much to be gained from offering the option to pay by e-invoice and online banking payment.


The future of Nordic payments


Looking ahead, this payment mix is expected to shift even further in favour of alternative payments. As predicted by WorldPay in its Global Payments Report 2016, credit cards and debit cards will fall in popularity, replaced by increasingly convenient payment options like online banking payments. In Norway, for instance, credit and debit cards currently represent 39% of ecommerce transactions. But by 2020, they will account for just 25% of that market.


Three key factors driving the shift toward alternative payments

Why such a dramatic shift? We’ve highlighted three key catalysts.


1) Technological advances are enabling safer, more convenient authentication methods

  • While today cards are one of the most popular ways to pay online in the Nordics, the fact remains that they are fraught with fraud — not to mention that keying in a long string of numbers is rather inconvenient, especially on mobile.
  • As technology advances, safer and more convenient electronic authentication methods are becoming more widely adopted. In Sweden, for example, the adoption of Mobile BankID has more than tripled in the past three years. The growing acceptance of a secure and mobile-friendly authentication method paves the way for an increase in online bank payments as the preferred method of payment.


2) New legislation is opening up opportunities for FinTech innovations

  • Several innovative and low-cost payment solutions, called “payment initiation services,” are already offered in a number of EU Member States (for example, Trustly in Sweden and iDeal in the Netherlands) and aim to give more flexibility to consumers who want to make cross-border payments without a credit card. The adoption of the revised payment services directive (PSD2) will encourage even more FinTech players to enter the market and ensure all such companies are regulated.


3) Cost-conscious and digitally savvy Millennials are demanding more flexible payment options

  • Did you know that 71% of Millennials would rather go to the dentist than listen to what their bank has to say? That statistic suggests that this maturing generation is tired of the traditional banking experience. While they are expected to be the first generation to earn less than their parents, they are also digital natives. They seek out payment methods that give them greater control over their finances, like e-invoicing, which let them pay in instalments. A generation wary of falling into debt, they also avoid cards and other methods that may incur hidden fees, opting instead for online banking payments and pre-paid cards.


The cold, dark and lucrative land of opportunity

While individually Denmark, Norway, Sweden and Finland are relatively small markets, together they are home to a very connected population of more than 25 million people. Thanks to an average internet penetration of around 94%, eCommerce is booming. In fact, down south in Denmark, a whopping 70% of its population shops online.


But where are they shopping from? Domestic retailers, of course, but in 2015, cross-border purchases were worth more than €4.2B. Across the Nordics, 40% of consumers reported having purchased something from a foreign website, with the UK being the leading online shopping destination, followed by Germany, China and the US.

Nordics cross-border article

For foreign merchants, especially those in the UK, the Nordic region holds much opportunity.


Getting the payment mix right


When targeting international shoppers, it’s important to think globally but act locally. Offer a payment mix that will be familiar to and convenient for your customers.


In the Nordics, that means letting your customers pay not just with credit or debit cards, but with invoices and online banking payments. And given that there are a large number of banks in the Nordics, using an already established payment service provider gives you access to the entire region (and beyond) by signing just one agreement.

Sample Mobile Checkout article

By understanding consumer preferences and completing the checkout with popular alternative payment methods, merchants near and far will be equipped to unlock the full potential of the Nordic market.

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