While the Nordic financial sector is among the most advanced in the world, it is coming under pressure from card networks such as Mastercard and Visa, the major technology platforms such as Google and Amazon, and new challengers such as Klarna. PA Consulting’s finance expert, Frode Lervik, outlines four scenarios for the future of payment services in the Nordic region.
He presented the four scenarios at the Payment Mediation Conference 2021 and explains, “The four scenarios are extreme extremes. We will not end up exactly in one of them, but they provide a basis for discussing which direction we are going in. They will help us to understand and see uncertainties and development trends in the industry.”
The first scenario sees payment continuing to be an important part of the banks' value chain and Nordic banks and payment networks retaining a leading and competitive position in the market. They then use innovation and build on their success to expand internationally.
In the second scenario, the trading industry dominates payment after developing their own systems where payment is part of the transaction rather than a separate step in the process. They control their own customer data but work closely with banks and fintech.
The third scenario sees card networks, primarily Visa and Mastercard, take over payment services in the Nordic region after the acquisitions of Klarna and Nets. They may develop in-house approaches or make acquisitions of fintech companies or work in collaboration with the large technology companies.
The fourth scenario sees big technology companies like Google and Amazon dominate the payment market. All payments are integrated into their cloud-based solutions and provide a low cost seamless customer experience and the Nordic banks end up having little relevance for customers in this area.
PA Consulting sees the Nordic banking industry moving towards a scenario where payment is an integral part of customers' purchasing process and is controlled by global players.
Frode Lervik says that there will be a need for Norway to ensure sufficient national control over payment services. “I think the influence of big tech will continue. It is up to us to set the framework for them in a way that gives us control and enables the social development we want. It is not just a question of commercial forces, but also regulatory and societal issues.”
This reflects the work authorities in both the Nordic countries and the EU are doing to get payment services into a form that benefits society and this will have an impact on employment in finance in Norway.
Lervik continues, “To ensure that you have a safe and secure infrastructure from the perspective of Norwegian society, you must have expertise on Norwegian soil. You have to have environments that you understand and are able to control.”