Despite high market penetration, the Nordic region’s payments ecosystem remains fragmented, favouring a handful of dominant players. But this power dynamic is changing.
PYMNTS recently reported that the Nordics have been a “global digital payments frontrunner for decades.” But the relatively small region is also one of the most fragmented, making it challenging for any fintech to gain access to the zone.
A 2022 report by Swedish bank Riksbank revealed that more than 80% of in-store purchases are made with a card or mobile phone in Norway, Sweden, and Denmark. According to Denmark’s official government statistics, card transactions in the Danish zone alone topped $93.5 billion (DKK642 billion) in 2022. And in 2021, Swedes paid a total of $106.3 billion (SEK1,115 billion) by card.
The Nordic payments sector is a promising revenue stream for any fintech hoping to tap into it – if they can overcome the hurdles.
“FINTECHS ARE ASKING THEMSELVES, ‘WHY ARE WE PAYING FOR PAYMENT SERVICES WHEN WE COULD DEVELOP OUR OWN? BY PARTNERING WITH SOMEONE THAT CAN PROCESS THOSE PAYMENTS, THEY CAN IMMEDIATELY COMPETE AT AN EQUAL LEVEL WITH ESTABLISHED PLAYERS.”Ruben Frimand Nielsen, Vice President of Sales and Business Development for the Nordics at Finaro
Nordic payments fragmentation
The fragmentation of this zone comes about because of different currencies, languages, and myriad local card and wallet implementations. In Denmark, for example, the nationally issued Dankort dominated for years due to higher transaction fees for foreign cards.
In Norway, the country’s BankAxept card still dominates the market, even over Visa and Mastercard.
The Swedes love to pay with Swish, while the Danes use MobilePay. In April 2021, 100% of Danes in their 20s, and 99% in their 30s, paid with MobilePay at least once.
To successfully enter the Nordic payments market, a player would need to support each of these different payment methods. Previously, that meant building an in-house solution, and typically teaming up with multiple partners.
But new market entrants – powered by Finaro’s end-to-end white-labelled payments solution that caters to every Nordic region’s payment idiosyncrasies – introduce an interesting shift in power dynamics to the region.
Loss of market share opens the door to new entrants
A changing global ecosystem has resulted in enough loss of market share for major players, so that entrants now stand a chance of competing.
For example, the “pure” Dankort has been incompatible with popular payment systems such as Google Pay and Apple Pay. This has led to the rise of so-called “co-branded” Dankorts, issued in combination with Visa or Mastercard.
“Pure” Dankorts accounted for a mere 1.3% of all card payments in Denmark for Q1 2023. Co-branded Dankorts, however, made up over 65% of card payments for the same time period.
In the past, capturing the Dankort market meant signing up with the only company legally allowed to process Dankort payments. Today, the strategy is completely different: You can just ignore it. The negligible volume of transactions, coupled with more competitive pricing from entrants means that merchants are now finally willing to reject Denmark’s “preferred means of payment” – at least the non-Visa version of it.
The same is true in Norway with its BankAxept card, the most popular debit card in the country. Few of the “pure” BankAxept cards exist anymore. The majority is now co-branded with Visa or Mastercard, making it possible for other payment processors to process them.
“One of our Fintech clients is already disrupting the market in Denmark,” says Ruben Frimand Nielsen, Vice President of Sales and Business Development for the Nordics at Finaro. “Because of superior pricing, and the ability to own the entire relationship, the company could offer payment terminals to merchants for free. This was previously unheard of in Denmark. In light of this major saving, the merchants didn’t care that they couldn’t accept Dankort.”
Finaro is also officially an acquirer for MobilePay, and MobilePay is available though Finaro’s gateway, as well as almost all major international wallets, including Google Pay, Apple Pay, and WeChat Pay. In total, Finaro offers access to over 250 different payment methods globally.
How Finaro empowers fintechs in the Nordics and beyond
Loss of market share hasn’t been enough on its own to radically disrupt the Nordic payments market. But if you add the ability to own the entire payments relationship, and charge more competitive rates to merchants, a lot more opportunities exist for players bold enough to try and take a slice of the market from the giants.
Finaro provides the full gamut of payment services from gateway to processing to acquiring. Because it’s an acquiring bank, it can set its own card transaction fees for partners. The company is also a licensed bank, giving it the power to set its own rates for FX trades, provide lines of credit, loans, or even open up business accounts.
In essence, any fintech wishing to plug into Finaro’s payments solution would own the entire relationship with its merchants and be able to offer the full list of financial services.
“Fintechs are asking themselves, ‘Why are we paying for payment services when we could create our own?’” says Nielsen. “By partnering with someone that can process those payments, they can immediately compete at an equal level with established players in the Nordics. Companies that already have merchants using their products can take full advantage of the payments infrastructure. For example, a fintechs providing a billing system could add a white-laballed payments solution that they could run on their own terms.
Companies can go all-in with Finaro or use only what they need, such as Finaro’s acquiring service. But every gap can be immediately filled. Additionally, Finaro is currently focusing on long-term partnerships in the Nordics rather than on contracting directly with merchants, thereby greatly reducing the chances of any conflict of interest—something that has historically been a problem in Denmark, says Nielsen.
The benefit for fintechs is Finaro’s global reach: Companies entering Europe or the Nordics using Finaro’s backend would immediately gain access to international markets using the same infrastructure.
“Even many big companies haven’t yet recognized how much control they can take of the payment processing cycle,” says Nielsen. “It could become an entirely new revenue generator for them because everything is streamlined under Finaro’s umbrella.”
- Only 1.3% of card transactions in Denmark were made with “pure” Dankort in Q1 2023.
- Swedes paid over $106.3 billion by card in 2021.
- Over 80% of in-store purchases in Norway, Denmark, and Sweden are made with a card or mobile phone.
- 100% of Danes aged 20 – 29 paid with MobilePay in April 2021, and 99% aged 30 to 39.