Four decades in the making, Denmark’s
electronic payments infrastructure is largely the product of close
co-operation among the country’s banks and enthusiastic adoption of
electronic payment alternatives to cash. Continuing in this
tradition, Danes are now in the forefront of internet
e-commerce.
electronic payments infrastructure is largely the product of close
co-operation among the country’s banks and enthusiastic adoption of
electronic payment alternatives to cash. Continuing in this
tradition, Danes are now in the forefront of internet
e-commerce.
This year Denmark celebrates 40 years of
development of its electronic payments infrastructure – today among
the world’s most integrated and intensely used. To significant
extent, development has been driven by close co-operation between
members of the Danish Bankers Association (DBA), a trade
organisation of 144 members encompassing commercial banks, savings
banks, co-operative savings banks and Danish branches of
international banks.
development of its electronic payments infrastructure – today among
the world’s most integrated and intensely used. To significant
extent, development has been driven by close co-operation between
members of the Danish Bankers Association (DBA), a trade
organisation of 144 members encompassing commercial banks, savings
banks, co-operative savings banks and Danish branches of
international banks.
Development of Denmark’s electronic payments
infrastructure has been spearheaded by Pengeinstitutternes
BetalingsSystemer – or Banks’ Payment Systems (PBS) – a company
established in 1968 and jointly owned by Danish banks and the
country’s central bank, the National Bank of Denmark (NBD). The
objective was to create a standard to permit collective use of
common computer resources. Today nearly all electronically based
payment instruments available to Danish bank customers – direct
debit and credit facilities and card systems – are operated by
PBS.
infrastructure has been spearheaded by Pengeinstitutternes
BetalingsSystemer – or Banks’ Payment Systems (PBS) – a company
established in 1968 and jointly owned by Danish banks and the
country’s central bank, the National Bank of Denmark (NBD). The
objective was to create a standard to permit collective use of
common computer resources. Today nearly all electronically based
payment instruments available to Danish bank customers – direct
debit and credit facilities and card systems – are operated by
PBS.
In 2006 PBS
processed almost 3 billion electronic payments transactions, making
Danes among the most intensive users of electronic payments in
Europe. According to the European Central Bank (ECB), an average of
109 per inhabitant in Denmark in 2006 ranks it fifth in Europe
alongside Germany. Notably Denmark also recorded one of the most
rapid increases in the use of electronic payments between 2000 and
2006, with the number of transactions per inhabitant increasing at
a CAGR of 12.1 percent. This compared with the average CAGR of 5.6
percent recorded in the top three countries, Finland, the UK and
Netherlands, during the six year period.
PBS’ first initiative in 1971 when it initially
introduced a direct credit service focused on wage, salary and
pension payments. In 2006 direct credit transactions in Denmark
transactions totalled €570.2 billion ($883 billion), or 84 percent
of all non-cash transactions, according to the ECB.
introduced a direct credit service focused on wage, salary and
pension payments. In 2006 direct credit transactions in Denmark
transactions totalled €570.2 billion ($883 billion), or 84 percent
of all non-cash transactions, according to the ECB.
The direct credit service was joined in 1974 by
the Betalingsservice system of pre-authorised direct debits.
According to the ECB the total value of direct debit transactions
processed in 2006 (all by PBS) was DKK522.7 billion ($101 billion)
or 9.6 percent of total non-cash transactions. This was up from
DKK362 billion in 2000 and represented a CAGR of 6.3 percent over
the six years. The total volume of transactions processed by the
Betalingsservice system in 2006 was 168 million or 30.7 per person
based on Denmark’s population of 5.48 million.
the Betalingsservice system of pre-authorised direct debits.
According to the ECB the total value of direct debit transactions
processed in 2006 (all by PBS) was DKK522.7 billion ($101 billion)
or 9.6 percent of total non-cash transactions. This was up from
DKK362 billion in 2000 and represented a CAGR of 6.3 percent over
the six years. The total volume of transactions processed by the
Betalingsservice system in 2006 was 168 million or 30.7 per person
based on Denmark’s population of 5.48 million.
However, as important as PBS’ direct credit and
debit initiatives were, probably its most significant move was into
payment cards. This came in 1979 with the establishment of a
dedicated card unit, the Banks’ Payment and Credit Card Company,
focused on development of a national debit card, the Dankort card.
The first Dankort card was issued in 1983 and in 1988 was
supplemented by the co-branded Visa/Dankort card, which has a
credit function and can be used nationally and
internationally.
debit initiatives were, probably its most significant move was into
payment cards. This came in 1979 with the establishment of a
dedicated card unit, the Banks’ Payment and Credit Card Company,
focused on development of a national debit card, the Dankort card.
The first Dankort card was issued in 1983 and in 1988 was
supplemented by the co-branded Visa/Dankort card, which has a
credit function and can be used nationally and
internationally.
The Dankort card rapidly established a strong
following and continues to dominate the Danish payment card market.
At the end of 2006 there were 3.68 million Dankort cards in issue
and the total volume of Dankort transactions processed by PBS
during that year was 676 million.
following and continues to dominate the Danish payment card market.
At the end of 2006 there were 3.68 million Dankort cards in issue
and the total volume of Dankort transactions processed by PBS
during that year was 676 million.
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Indicative of the dominance of the Dankort card, at the end of 2006
it represented 87 percent of a total of 4.22 million debit cards in
issue. The two most notable competing brands accounted for a
further 11.5 percent. These were Visa Electron (392,513 cards) and
MasterCard Maestro (93,090 cards).
Though credit cards were slow in gaining wide
acceptance in Denmark the numbers in issue have grown rapidly in
recent years. According to the ECB there were 1.02 million credit
cards in issue at the end of 2006 – more than double the 497,000
total five years earlier. During the same period the number of
debit cards in issue increased by a third.
acceptance in Denmark the numbers in issue have grown rapidly in
recent years. According to the ECB there were 1.02 million credit
cards in issue at the end of 2006 – more than double the 497,000
total five years earlier. During the same period the number of
debit cards in issue increased by a third.
The total volume and value of credit card
transactions have also grown rapidly in recent years. Between 2001
and 2006 the ECB reported that the volume of credit card
transactions had increased from 13 million to 49.4 million, a CAGR
of 30.6 percent. The value of credit transactions during the period
increased from KRR11.95 billion to KRR32.96 billion, a CAGR of 22.5
percent.
transactions have also grown rapidly in recent years. Between 2001
and 2006 the ECB reported that the volume of credit card
transactions had increased from 13 million to 49.4 million, a CAGR
of 30.6 percent. The value of credit transactions during the period
increased from KRR11.95 billion to KRR32.96 billion, a CAGR of 22.5
percent.
By
comparison the volume of debit card transactions reflected a CAGR
of 9.8 percent between 2001 and 2006, from 453 million to 722
million, while the value of debit card transactions reflected a
CAGR of 11.6 percent, from KRR157.7 billion to KRR272.35
billion.
Overall PBS has grown to become the biggest
card processor in Scandinavia, measured in terms of the number of
transactions. Danes in turn are among Europe’s most prolific users
of cards for payment. According to the ECB, in 2006 an average of
142 card transactions per inhabitant were made in Denmark, ranking
it second in Europe behind Finland where an average of 154 card
transactions per inhabitant was recorded.
card processor in Scandinavia, measured in terms of the number of
transactions. Danes in turn are among Europe’s most prolific users
of cards for payment. According to the ECB, in 2006 an average of
142 card transactions per inhabitant were made in Denmark, ranking
it second in Europe behind Finland where an average of 154 card
transactions per inhabitant was recorded.
The relatively recent surge in enthusiasm for
credit cards among Danes has also stimulated innovation in the
market. A notable example was the introduction in 2007 by oil
company Shell and US bank Citibank of the Shell MasterCard, the
first combination of a fuel card and a credit card in Denmark.
Shell and Citibank are targeting Denmark’s more than two million
private drivers that they termed a “huge credit card niche”.
credit cards among Danes has also stimulated innovation in the
market. A notable example was the introduction in 2007 by oil
company Shell and US bank Citibank of the Shell MasterCard, the
first combination of a fuel card and a credit card in Denmark.
Shell and Citibank are targeting Denmark’s more than two million
private drivers that they termed a “huge credit card niche”.
In tandem with intensive card use has been the
proliferation of electronic POS devices in Denmark to a point where
numbers have been in decline in recent years.
proliferation of electronic POS devices in Denmark to a point where
numbers have been in decline in recent years.
According to the ECB the number POS devices per
million inhabitants grew from 22,447 in 2000 to a peak of 25,095 in
2003 before falling to19,759 in 2006. This left Denmark on par with
other high POS density country’s such as Finland (19,938 POS per
million inhabitants) and Sweden (20,102) but well ahead of other EU
countries such as the UK (17,399), Netherlands (13,124) and Germany
(7,022).
million inhabitants grew from 22,447 in 2000 to a peak of 25,095 in
2003 before falling to19,759 in 2006. This left Denmark on par with
other high POS density country’s such as Finland (19,938 POS per
million inhabitants) and Sweden (20,102) but well ahead of other EU
countries such as the UK (17,399), Netherlands (13,124) and Germany
(7,022).
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By GlobalDataAn e-commerce society
A key factor driving the use of credit cards has been a significant
rise in the volume of retail commerce via the internet in the past
few years. A significant factor driving e-commerce is high internet
penetration in Denmark. According to Denmark’s central statistics
service StatBank, 86 percent of Danes had internet access at the
end of 2007, up from 45 percent in 2000.
According to European Union (EU) statistical
service Eurostat, strong acceptance of online commerce saw 55
percent of Danes aged between 16 and 74 shopping on the internet in
2006. Though Eurostat did not provide the percentage for 2007 it
did for all other EU countries. Notably, in 2007 only Netherlands
equaled Denmark’s 55 percent of online shoppers while the overall
average for the 27 EU countries was 30 percent.
service Eurostat, strong acceptance of online commerce saw 55
percent of Danes aged between 16 and 74 shopping on the internet in
2006. Though Eurostat did not provide the percentage for 2007 it
did for all other EU countries. Notably, in 2007 only Netherlands
equaled Denmark’s 55 percent of online shoppers while the overall
average for the 27 EU countries was 30 percent.
Growth in internet shopping by Danes
continues to gain momentum. Figures supplied by PBS reveal that the
number of online card payments increased by 22.4 percent between
the first quarter of 2007 and the first quarter of 2008 from 7.68
million to 9.4 million.
Of the total in the first quarter of 2008
Dankort and Visa/Dankort cards accounted for 7.94 million (84.5
percent) of payments and international cards 1.42 million payments.
PBS’s internet-only card, the eDankort introduced in September
2003, accounted for a mere 12,235 transactions, down from its best
ever 16,141 transactions in the first quarter of 2007.
Dankort and Visa/Dankort cards accounted for 7.94 million (84.5
percent) of payments and international cards 1.42 million payments.
PBS’s internet-only card, the eDankort introduced in September
2003, accounted for a mere 12,235 transactions, down from its best
ever 16,141 transactions in the first quarter of 2007.
Danes have also become avid users of internet
banking. According to Eurostat 70 percent of Danes in the 16 to 74
age group used the internet for banking in 2006. This level was
exceeded in 2007 only by Finland (84 percent), Estonia (83 percent)
and the Netherlands (77 percent) while the average for all 27 EU
countries was 44 percent.
banking. According to Eurostat 70 percent of Danes in the 16 to 74
age group used the internet for banking in 2006. This level was
exceeded in 2007 only by Finland (84 percent), Estonia (83 percent)
and the Netherlands (77 percent) while the average for all 27 EU
countries was 44 percent.
Increased adoption of the internet and other
electronic payments options is resulting in a steady decline in the
number of bank employees and branches, notes the DBA. A similar
trend is also evident in the use of cheques.
electronic payments options is resulting in a steady decline in the
number of bank employees and branches, notes the DBA. A similar
trend is also evident in the use of cheques.
According to the ECB during most of the 1980s,
the number of cheques issued was stable, at around 210 million per
annum, or about 40 cheques per capita. Cheque truncation was
introduced in the early-1980’s with all clearing being executed
electronically.
the number of cheques issued was stable, at around 210 million per
annum, or about 40 cheques per capita. Cheque truncation was
introduced in the early-1980’s with all clearing being executed
electronically.
However with the rise in popularity of the
electronic alternatives such as the Dankort card and
Betalingsservice system the use of cheques began a steady decline
in the late 1980’s and by 1992 the number of Dankort transactions
exceeded the number of cheques used for the first time. By 2006 a
mere 19.4 million cheques were used, though the total value of
transactions was still a sizable DKK 368.3 billion in 2006, or 6.8
percent of total electronic payments. At the peak of cheque use in
1988 total transactions valued at KRR2.5 trillion were
recorded.
electronic alternatives such as the Dankort card and
Betalingsservice system the use of cheques began a steady decline
in the late 1980’s and by 1992 the number of Dankort transactions
exceeded the number of cheques used for the first time. By 2006 a
mere 19.4 million cheques were used, though the total value of
transactions was still a sizable DKK 368.3 billion in 2006, or 6.8
percent of total electronic payments. At the peak of cheque use in
1988 total transactions valued at KRR2.5 trillion were
recorded.
Despite the rise in electronic payments in
Denmark, cash remains far from obsolete. Though the NDB does not
provide statistics on the public’s use of cash the total value of
banknotes and coins in circulation indicates that the use of cash
is increasing more or less in line with Denmark’s economic growth
rate. Between 2000 and 2007 currency in circulation increased from
DKK39 billion to DKK51.9 billion, a CAGR of 4.2 percent. During the
same period income per capita increased at a CAGR of 4 percent,
according to international body the Organisation for Economic
Co-operation and Development.
Denmark, cash remains far from obsolete. Though the NDB does not
provide statistics on the public’s use of cash the total value of
banknotes and coins in circulation indicates that the use of cash
is increasing more or less in line with Denmark’s economic growth
rate. Between 2000 and 2007 currency in circulation increased from
DKK39 billion to DKK51.9 billion, a CAGR of 4.2 percent. During the
same period income per capita increased at a CAGR of 4 percent,
according to international body the Organisation for Economic
Co-operation and Development.
Significant opportunities to reduce the
importance of cash in Denmark remain. Among these is the
introduction of contactless payment cards, a development being led
primarily by the country’s public transport sector which in 2003
embarked on an ambitious programme that by 2009 is anticipated to
have a national ticketing system in place for use on trains and
busses. The programme involves the issue of about 1 million
cards.
importance of cash in Denmark remain. Among these is the
introduction of contactless payment cards, a development being led
primarily by the country’s public transport sector which in 2003
embarked on an ambitious programme that by 2009 is anticipated to
have a national ticketing system in place for use on trains and
busses. The programme involves the issue of about 1 million
cards.
Prepaid cards in general also represent a cash
replacement opportunity. However, with few exceptions such as phone
cards consumer enthusiasm for prepaid cards among Danes is low.
Indicatively, a general use prepaid card launched by PBS in 1991,
the Danmont card, proved unpopular and was discontinued in
2005.
replacement opportunity. However, with few exceptions such as phone
cards consumer enthusiasm for prepaid cards among Danes is low.
Indicatively, a general use prepaid card launched by PBS in 1991,
the Danmont card, proved unpopular and was discontinued in
2005.
