The Nordic region is one of the world’s most advanced retail payments markets and an innovation hotspot. Hastened by COVID-19, technological developments will further accelerate transformation during the 2020s, leading to unprecedented industry change.
To better understand how this faster change will evolve the ecosystem and how leaders can best respond, we interviewed a wide range of key stakeholders in the region. We then used our FutureWorlds™ methodology to develop four potential scenarios for 2030, which we’ve outlined in detail in our latest Nordics Payments report.
The possible futures we’ve envisaged – which function as provocations, not predictions – make it clear that Nordic payments are at an inflection point. Incumbents face increasing threats from new entrants and the barriers between local and global initiatives are becoming blurred. Banks must act now, and act decisively, if they’re to retain their influence on the industry’s development. While building on their strengths, they must be willing to break away from traditional approaches and current business models.
Drawing on current industry developments and the experience of our payments and technology experts,
we’ve developed three recommendations for Nordic banks:
These actions hold the key to Nordic banks’ ability to respond to the threats they face, to develop new offerings and business models, and to shape the future of Nordic payments. This will not only help banks and their customers. It will also ensure Nordic society continues to share the benefits of fast, efficient and secure payments long into the future.
Retail payments is one of the most complex and fast changing areas of finance, and the Nordic payments industry is among the world’s most advanced and innovative. All four core Nordic markets have high levels of card penetration and digital adoption.
Even before COVID-19, cash usage was falling and annual growth in card transactions was typically running at 5-6 per cent. More recently, the pandemic has given a further boost to online commerce and contactless payments, the latter growing by 12 per cent in the first four months of 20201.
Several drivers are shaping the evolution of payments across the Nordic markets. These include the rapid advance of local and global mobile wallets; the success of new business models such as Sweden’s Klarna; regional partnerships such as P27, which aims to establish a single Nordic payment infrastructure; the widespread use of digital ID, led by Norwegian and Swedish BankID, NemID and TUPAS; European regimes such as the EU’s ‘open banking’ directive PSD2, soon to be followed by an even broader PSD3; and global initiatives such as the international financial data standard ISO 20022.
Looking ahead, the continued rapid growth of contactless and online payments, together with the adoption of new technologies, including account-to-account (A2A) solutions, QR codes and ‘PIN on COTS’ payments will help to further accelerate payment transformation in the Nordics.
To fully analyse and understand how Nordic payments will evolve, we need to understand how we got to this stage. So, in the report, we present a concise snapshot of each country’s recent developments in the payments industry, using this as the foundation for our provocative FutureWorlds™ scenario planning. Using today’s trends, we map the direction the payments ecosystems might take.
Our FutureWorlds™ scenario planning methodology helps organisations anticipate and prepare for the future. The aim is not to predict but to provoke, allowing the development of informed, adaptable strategies. Each of the four possible worlds assumes a different type of change in the underlying behaviours of the market.
Do strong local payment schemes prevail over global ones, or do they fade into irrelevance as global players dominate the ecosystem? Do payment journeys become so seamless that consumers no longer take notice of the banks that are delivering the infrastructure or does distinct branding persist?
The four potential future worlds that we believe are the most useful to consider are:
Using these four worlds as different lenses to look at each country’s existing relationships and systems, we’re able to identify where the most dramatic changes are likely.
This can then inform banks’ strategies for staying at the forefront throughout change.
In reality, none of these four worlds will entirely come to pass – these are just the extremes that help us imagine how things could evolve. But elements of all four are likely to happen.
We expect the next decade to see the industry move from its current position near the incumbent innovation world towards the all change world, taking in features of globalised Nordics and new allies on the way. In the full report, we draw out how we think each country will develop and evolve, and outline how the Nordic payments market could look in 2030.
Our four future scenarios all imply that Nordic payments will undergo ever faster development and innovation over the coming decade, accelerated by the impact of emerging technologies and COVID-19.
Global payments and technology giants are building their advantages in scale, technology and branding. In contrast, incumbent banks face the threat of reducing customer interactions, falling revenues and declining influence.
These aren’t new trends, but we are getting ever closer to a tipping point and banks must act now if they want to reverse this narrative.
Nordic banks have their own advantages, such as comprehensive infrastructure, high levels of customer trust and public goodwill, and extensive market knowledge and regulatory insight. But banks need to ask themselves some tough questions. Do they have a clear vision of the future? Are they ready and able to adapt to a changing environment? Can they continue to actively shape the evolution of the payments industry?
Answering these questions and shaping a successful response will require banks to act in the three critical areas highlighted at the start. In the full report, we look in depth at what each of these areas means, how banks can approach answering these questions and how they can position themselves for success.
Inflection point – Discover how incumbents can shape the future of Nordic payments in our new report