An interview with Odd Birkenes and Jørgen Grüner-Hagen
NorgesGruppen, Norway's largest retail business is considering introducing fees on the use of various payment instruments. Following their recent announcement that they are fast becoming the most vital cash handler in Norway, we spoke to their director of value added services, Odd Birkenes, and IT director, Jørgen Grüner-Hagen, about their decision and their view on the future of the payments market.
NorgesGruppen’s core business is grocery retailing and wholesaling and through its chains, the group holds a market share of 39.9% of the Norwegian grocery market. The wholesale business is in charge of the total flow of merchandise and information in the group.
PA: Why are you considering introducing payment fees?
We have been thinking about introducing fees for a few years, but following the recent mass issuing of contactless cards the need for it has become more pressing. Transaction costs have been low and remain unchanged since the mid- 1990s when Skandiabanken was launched as the first Nordic bank without transaction fees.
Our stores’ costs have been, and remain, low because most people still use BankAxept (for which the user pays nothing) as a payment instrument. However, things are changing.
We are experiencing a shift from traditional payment methods to contactless cards and mobile payments. For now, the new contactless payment solutions are primarily connected to Visa and MasterCard – players
PA: What are the challenges you face when introducing fees?
There have been several discussions about this new contactless technology, but there has been very little focus on the costs affiliated with the payment solutions so far. At NorgesGruppen we will have to divide the costs between several players. Because transparency is of vital importance to us, we can choose to display the fee on the receipt or we can include the increased cost associated with the new payment methods in the product price. Either way, this is not a fee that is coming directly from NorgesGruppen because it originates from other players in the payment chain.
The EU is adopting multilateral interchange fees which regulate premiums on interchange fees for private credit and accounts for over 95% of all credit card sales. The premium is regulated to 0.2 % on debit transfer and 0.3 % on credit transfer. This is good because it will bring down costs as it becomes cheaper for the customers. In addition, there is a suggestion in Payments Services Directive to introduce a ban on ‘surcharging’. If this ban is introduced and implemented in Norway, we will of course adopt it, but we think the country has a much more cost efficient payment through BankAxept.
This will mean that customers who choose BankAxept as a payment method contribute to cover the cost for customers who pay by credit card.
In addition, we want our customers to be able to use our Trumf customer loyalty programme independent of the payment solution they are using. This is something we are working on getting in place before the possible launch of contactless payment in NorgesGruppen's stores. As of now, only BankAxept cards are connected to our Trumf solution, but we want to have a separate Trumf card which can be used if the customer does not have their Trumf programme connected to their bank account.
PA: What does the future hold for cash management?
Banks are closing down the cash handling systems in their own branches and the role of handling cash withdrawals and deposits is being pushed further towards in-store banks/post offices. We are comfortable with this transition but there are affiliated costs which need to be analysed. It may be that we consider placing fees on cash withdrawals in the future.
A new regulation specifies the bank’s duty to be able to handle cash – both in and out – but allows for this to happen through a third party, ie in-store banks. We want in-store banks to be further developed in cooperation with all banks in Norway. This is because stores understand the service, they already have the infrastructure and they have customers that visit their stores three to four times a week. However, an agreement with banks is essential. We hope that, when the new legislation comes, banks will come to NorgesGruppen to propose a deal so we can deliver the service on their behalf.
When looking at our stores, the cash handling machines we use today are more secure against robberies than the traditional cash register. Small and medium-large companies often have the need to withdraw or deposit cash and with our cash handling machines they can avoid safe-deposit boxes and bank opening hours.
We are seeing a decline in the need for cash withdrawals – and the same is happening with the volume of transactions – but there is still a need for handling cash.
PA: Is self-checkout successful in your stores?
Self-checkout is working very well. We have installed points in suitable stores – in central areas where customers want to make small, fast purchases.
In conclusion – whatever the future may hold there is no doubt that major merchants like NorgesGruppen will play a significant role in shaping the future payments structure. We are only just seeing the first developments and reactions of a large infrastructure being disrupted by new services and actors entering the scene. It is however clear that the Nordic countries are at the cutting-edge of the technological developments with exciting start-ups and initiatives across sectors and industries.
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