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  1. Analysis
March 29, 2016

Denmark continuing its payment prosperity

With a well-developed market, one of the best in the Baltic region, one wonders how it could possibly improve on its already envious position. This is where contactless is coming in, not only to raise card adoption levels within the country, but also to bring Denmark one step closer to being a cashless society

By Verdict Staff

With a well-developed market, one of the best in the Baltic region, one wonders how it could possibly improve on its already envious position. This is where contactless is coming in, not only to raise card adoption levels within the country, but also to bring Denmark one step closer to being a cashless society

The Danish cards and payments industry is well-developed, and Danish consumers are prolific users of payment cards.

This is evident by the fact that in 2014 the country had the highest frequency of use (transactions per card per year) in the world – 173.6 transactions per card.

Denmark is followed by Nordic peers – Finland with 170, Norway with 126.3, and Sweden with 126.2 transactions in 2014.

The consumer preference for electronic payments and government plans to advance as a cashless society supported the growth of payment cards.

Overall, payment cards posted a compound annual growth rate (CAGR) of 6.70% in terms of transaction volume between 2010 and 2014 – a trend that is anticipated to continue over the next five years.

The government took several initiatives to bring the entire population into the banking system.

According to the World Bank Global Findex survey, the percentage of Danish population aged 15 or above with a bank account reached 100% in 2014. This resulted in high penetration of bank accounts and banking products such as debit cards.

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Denmark is moving towards a cashless societyCash payments are declining in Denmark. In terms of transaction volume, cash transactions accounted for 37.4% in 2010 and decreased to 16.1% in 2014. In comparison, in other developed European markets such as the UK, cash accounted for an industry share of 46.2% in 2014.

To encourage cashless payments, the Danish government proposed a plan in May 2015 to allow certain categories of retailers – restaurants, apparel stores and gas stations – to refuse payments in cash. The proposed plan is anticipated to be implemented by 2016.

In October 2014, the central bank announced that it would stop the internal production of the printing of banknotes and minting of coins by the end of 2016 and outsource the process to external suppliers.

Rising costs associated with cash handling and production are the reasons behind this move. The government claims that the initiative will save up to $17.2m (DKK100m) by 2020.

Dankort maintains its dominance in the Danish debit cards marketDankort is the national debit card scheme, which dominated the debit card market with an 83.7% share of the total transaction value in 2014.

Dankort cards were introduced in 1983 and have since dominated the market.

Visa and MasterCard are also strengthening their presence, with respective shares of 12.4% and 3.8% of the total debit card transaction value in 2014.

According to the New Payment Solutions report published by the Danish Payment Council in March 2014, Dankort was the most popular method of payment for purchases made at retail outlets.

The use of Dankort debit cards is widespread for a range of purchases, and 60% of online payments are made using Dankort and VisaDankort cards.

VisaDankort is a co-branded debit card which can be used as a Dankort card in Denmark or as an international Visa card abroad. Consumers can use the card at 24 million outlets with cash withdrawal options at 340,000 banks, and from 400,000 ATMs internationally.

High uptake of contactless technology to increase scope and adoption of card paymentsThe Danish payment cards market has seen a rising uptake of contactless technology.

According to Timetric, Denmark had the highest number of contactless terminals and the second-highest number of contactless cards in the Nordic region as of November 2015 – next only to Norway.

According to Timetric, there were 5.3 million contactless cards in the country as of November 2015 – equivalent to 60.2% of overall payments cards currently present in the marketplace.

Also, there were 61,600 contactless POS terminals in the country, representing roughly 40.1% of the overall number of POS terminals.

To capitalise on the growing popularity of contactless technology, Danske Bank and Jyske Bank began offering contactless Dankort cards from August 2015 to great acclaim.

Danske Bank replaced all old cards with contactless Dankort cards free of charge until November 2015.

M-payments are also gaining prominence in the region through a number of firms.

Verifone signed an agreement with the m-payment solution provider Swipp in November 2015, to allow 30,000 partner merchants to accept contactless payments using the Swipp app.

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E-commerce market offers scope for card paymentsE-commerce increased between 2010 and 2014, going from $7.1bn in 2010 to $13.1bn in 2014, at a CAGR of 16.57%.

The widespread digital access in the form of growing internet and mobile penetration rates is the key driver contributing to the growth of e-commerce in Denmark.

According to the ‘E-Commerce in the Nordics’ report published by PostNord in 2014, Denmark had the highest percentage of online shoppers in the Nordic region, with 37% of consumers shopping online at least once a month.

The report indicated that Denmark had the second-highest number of online shoppers in the region, and the second-highest percentage of online shoppers making purchases through mobile phones in 2013.

E-commerce growth in Denmark was facilitated by the development of internet and mobile payment services. Consumers mostly use payment cards to pay for their online purchases. All payment instruments – including payment cards, credit transfers, digital wallets, cash on delivery, mobile wallets, and direct debits – increased their share between 2012 and 2014.

According to a PayPal study in 2015, Denmark is anticipated to record the maximum m-commerce growth in Europe, with a CAGR of 55% between 2013 and 2016, while the rest of Europe is expected to record the lesser CAGR of 42% over the same period.

Growing number of POS terminal installations across the countryThe number of POS terminals increased over the past five years, going from 110,389 in 2010 to 139,240 in 2014, at a CAGR of 5.98%. The number of POS terminals is expected to increase at a CAGR of 3.90% from 2015 to reach 169,227 in 2019. The expansion of the organised retail sector is expected to drive the growth of POS terminals over the next five years.

The growing payment cards market had attracted several entrants to the Danish mPOS market.

Adyen launched an mPOS solution Shuttle in August 2013. It can be used to by merchants to accept payments via smartphones at POS terminals.

Shuttle is available in 17 European countries, including Denmark, Switzerland and Norway. Similarly, iZettle launched the iZettle Card Reader Lite in February 2015.

The product is a chip-and-PIN card reader that can be connected to tablets and smartphones via a cable.

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