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Scandinavia's mobile payment success stories face up to rival tech giants

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Scandinavia's mobile payment success stories face up to rival tech giants

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Mobile payment apps in action. From left: Android Pay by Google, Apple Pay and Sweden's homegrown payment platform, Swish, which was launched by six Swedish banks in 2012.
Pictures: Associated Press, Swish

Three bank-owned mobile payment applications that have helped Scandinavian banks withstand pressure from emergent financial technology companies now face intensifying competition from tech giants' digital wallets.

Swish in Sweden, Vipps in Norway and MobilePay in Denmark dominate Scandinavia's payment space, boasting respective adoption rates of 75%, 78% and 81% in each of their markets.

The apps enable Scandinavians to pay peers using only a mobile number, regardless of bank or phone brand. This has contributed to a dramatic reduction in the use of cash in the region, with everything from charity donations to flea market payments now app-led.

In Denmark, more than 700 churches use MobilePay instead of a traditional collection box, while in Sweden, sellers of the homeless magazine Situation Sthlm offer payments through Swish. Volumes of Swish payments are now worth more than 4% of Sweden's GDP, according to the Bank for International Settlements. Sweden's GDP was expected to have totaled 4.9 trillion Swedish kronor in 2019.

YouGov's 2019 BrandIndex ranks Swish, Vipps and MobilePay among the top three brands in Sweden, Norway and Denmark, respectively, beaten only by household names such as Ikea and Lego. MobilePay has overtaken Facebook as the "most indispensable app" in Denmark, according to an AudienceProject survey.

The apps' popularity in peer-to-peer payments has allowed them to swiftly expand into other, more profitable areas, including in-store payments, e-commerce and business e-invoicing and payments.

Common solutions

One key element that sets Swish, Vipps and MobilePay apart from payment solutions elsewhere is that they are driven collaboratively by the banks, rather than by third-party providers or as one bank's proprietary offering. This has given the apps a "very powerful distribution network," Peter Kjærgaard, head of press at MobilePay, said in an interview.

Swish was the first to be launched in 2012 by six large Swedish banks, with other financial institutions having since connected to the application.

"Having the Swedish banks both as owners and distributors have given our service a great deal of trust," said Swish CEO Anna-Lena Wretman.

Although it was released by Danske Bank A/S in 2013, MobilePay received a significant boost in 2016 when more than 70 banks ditched rival app Swipp to get behind a common solution. Vipps, meanwhile, was launched by DNB ASA in 2015, but was transferred to a separate company in 2017, owned by more than 100 Norwegian banks.

"What the banks have understood is that this is not the banks competing against other banks," Rune Garborg, CEO of Vipps, told S&P Global Market Intelligence. "It is actually the banks' effort to compete against Apple, Google and other players in payment."

'Different playing field'

Swish, Vipps and MobilePay have helped incumbent banks in Scandinavia withstand outside competition from fintech firms, said Kjærgaard. But the threat from technology giants such as Apple Inc., Alphabet Inc., Facebook Inc., Amazon.com Inc. and Samsung Electronics Co. Ltd. moving into the payment space could become a bigger challenge.

"Apple Pay is a very strong contender," said Garborg. "We feel we are positioned to compete, but of course, competing against Apple, Google [Android Pay] and other players is going to be harder and harder."

Denmark has had the largest uptake of Apple Pay to date, with 67 banks supporting the application. In Norway, 12 banks are supporting Apple Pay and 11 have backed it in Sweden.

"[The tech giants] are on a different playing field. It will be interesting to see if the banks can maintain their position in the three countries as Apple Pay and other wallets move in," Kjærgaard said.

Apple Pay has the advantage of being serviced by a global company while also having a monopoly over the use of the iPhone's near field communication chip, he said. This makes the app a particularly strong contender when it comes to payments in-store.

Jyske Bank A/S, which introduced Apple Pay to Danes in 2017, said its retail customers already use the solution 25% more often than MobilePay for payment in stores, Børsen reported in November. Danske Bank has also seen growth since it started offering Apple Pay in August.

So far, however, Apple's entrance on the Danish payment market has not impacted MobilePay's growth, Kjærgaard said.

In 2019, MobilePay facilitated 102 billion Danish kroner worth of transactions; 22 billion kroner more than in 2018. Around 140,000 stores and webshops now offer MobilePay payments, which is 20,000 more than at the beginning of 2019. More than 4 million people used MobilePay in 2019.

In Sweden, Swish facilitated close to 48 million transactions among 7.52 million users in November alone.

In Norway, almost 2 million people use Vipps each day.

Cross-border collaboration

The shape of the future payment landscape will depend on the incumbents' ability to collaborate across borders, said Garborg.

"If you look at Europe, there are 150 wallets or so. It's very difficult for those separately to compete against the big players. So you need broader collaboration between the banks and the wallets," he said.

That's one driver behind the European Mobile Payment Systems Association, which was launched in September by Swish, Vipps and MobilePay together with four other European payment applications, which will see them collaborate to enable the use of mobile payments systems internationally.

The regulators' response to the rise of the tech giants will be another important development to watch, with Margrethe Vestager, the EU's competition commissioner, saying in November that she was looking into Apple Pay over competition concerns.

As of Dec. 27, US$1 was equivalent to 9.34 Swedish kronor and 6.68 Danish kroner.