As the world continues to move away from cash, Scandinavian consumer behavior provides clues about the future of payments in the western world.
Scandinavia composed of Denmark, Norway and Sweden is experiencing an explosion in mobile payments, a continuous mastery of card payments and the rapid decline in cash use.
Sweden the leader in cash elimination
In 1661, Sweden became the first country in Europe to introduce bills and is also likely to be the first country in Europe to stop accepting cash. Sweden is the epicenter of the death of cash, with only 1% of the total value of payments in Sweden made in cash in 2016.
Time savings: IKEA store employees in Gavle, Sweden, reported that they spent 15% of their time handling, counting and storing money even though buyers used cash in less than 1% of transactions.
Income improvement: companies incur high risks and costs when handling cash. According to the Visa Cashless Cities report, “companies lose an equivalent of 4% of their income per month due to theft, counterfeit money and the cash register”
Security: the safety of workers and companies is greater when companies run out of cash. In addition, going without cash is also safer.
Strength of card payments
The dramatic growth of mobile payments has not reduced Scandinavia’s appetite for card payments. Scandinavians have the highest use of card payments per capita worldwide. For its part, Norway leads the group with 475 annual transactions per consumer. Card schemes have built an incredible infrastructure of acceptance and trust which allows Scandinavians to use their cards within the region and abroad.
While contactless payment is not exclusive to Scandinavia, Scandinavians will likely quickly adopt this payment method. In 2018, Norwegians used contactless payment for 4.5% of transactions in physical terminals; however, this will probably increase to more than 50% with three years.
Explosion of mobile payments
In Scandinavia, three popular domestic schemes lead mobile growth: Vipps in Norway, Swish in Sweden and Mobile Pay in Denmark. In 2018 alone, Vipps users in Norway made 141 million mobile payments totaling 67 billion Norwegian kronor, representing an annual growth of 55%. Scandinavian mobile payment schemes are experiencing a network effect where the greater number of users increases the value of the scheme. Vipps market penetration is 75%, Mobile Pay is 90% and Swish is 69%.
Scandinavians have naturally adopted electronic payments, but for many regions, the greatest driving force towards a society without cash is government policy. Cash-intensive companies have a higher risk of tax evasion and money laundering risk. Many governments have enacted cash restrictions to reduce the likelihood of illegal activity. This has pushed more consumers to adopt electronic payment methods.
Payment trends in Scandinavia will not be replicated identically throughout the world. There will be nuances, including some places where alternative payment methods are implemented, such as QR or biometric payments. However, the general rule is that we are moving towards a cashless society in an increasingly fast way.