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February 10, 2009updated 27 Jul 2022 6:24am

Finland plays its cards right

Despite having one of the smallest populations in the eurozone, Finland is miles ahead of the rest of Europe when it comes to card awareness and usage levels, and technological innovation is also making an impact

By Verdict Staff

Despite having one of the smallest populations in the eurozone, Finland is miles ahead of the rest of Europe when it comes to card awareness and usage levels, and technological innovation is also making an impact. But the lack of competition in the market could hamper credit growth, as Victoria Conroy reports.

It has been said that countries with cold climates are more favourable to electronic payments over cash, as individuals would prefer not to have to fumble with cash, or trek to the nearest ATM in harsh conditions. If that is the case, then Finland stands out as being the definitive example of such a market. Even the governor of Finland’s central bank, Erkki Liikanen, has said as much, stating that the country’s low usage of cash (32 percent as of 2008) is similar to the levels found in equally chilly Norway and Sweden.

Even though it has a population of only 5.24 million, within the eurozone Finland has the highest usage of card payments in terms of transactions per inhabitant, with the average usage per capita far outstripping the likes of the UK and the Netherlands.

Although cash still accounts for a high proportion of retail purchases (just over 50 percent of all purchases at the point of sale), cards have made impressive inroads thanks to Finnish consumers having a high level of awareness and education around electronic payments.

Younger consumers in particular are extremely comfortable with various types of electronic payment methods, and typically use more than one payment method when paying at the POS, although debit cards are the predominant method.

The rapid reduction of cheque usage in the Finnish market during the 1990s, following a concerted effort by payment players and government bodies, undoubtedly helped to accelerate debit usage – in 1984 cheques accounted for around 80 percent of retail payments, but by 2002, debit cards accounted for two-thirds of all card payment value.

A unique feature of the Finnish market is that almost all cash in circulation comes from the ATM channel, due to the relative lack of bank branch networks where customers can withdraw cash over the counter, and also due to Finnish banks running a joint interoperable ATM network with extensive coverage across the country.

However, the number and value of cash withdrawals is decreasing as more consumers use cards at the POS, and also, the number of ATMs in use is declining, due to bank consolidation of ATM networks and the growth of installed POS terminals.

Card usage trends

Finland. Value of card transactionsDominated by debit usage, domestic bank-owned ATM cards are in the process of being phased out in accordance with SEPA principles in favour of internationally-branded cards featuring EMV chip functionality, which has also given rise to multi-function or combination payment cards.

These cards are primarily used for debit payments, with the option to use the credit payment application built-in, mostly used when Finnish cardholders travel abroad. However, pure EMV debit cards are the most common form of debit card in the market.

Given that debit has such a stranglehold on the payment market it is not surprising that credit cards have been slow to take off. There has been, however, a significant amount of activity in the past two years as Finnish banks have become part of larger pan-Nordic banking groups which have leveraged their experience in other markets to update and enhance credit card offerings in Finland.

Finnish consumers are mostly transactors, not revolvers, when it comes to credit card usage. According to a study published by the Bank of Finland in mid-2008, 37 percent of young Finnish consumers had an outstanding credit balance, but only 5 percent of that figure originated from credit cards, with the rest of the outstanding credit coming from personal loans or mortgages.

Recently, Visa Europe highlighted Finland as being one of the few markets in Europe where credit card usage is still enjoying some level of growth. According to statistics from Visa Europe, the total number of Visa cards in the country grew by 10 percent in 2008, with double-digit growth seen in the number of both debit and credit cards.

Visa cardholder expenditure at the POS rose by almost 5 percent, with the number of POS transactions growing by 6 percent in 2008.

Consolidation means less competition

For those consumers that have internationally-branded Visa or MasterCard credit cards, the main motivation appears to be for the convenience of being able to use it abroad.

Even though Finnish issuers charge APRs of between 10 and 12 percent, which is low by western European standards, few Finnish credit cardholders do not pay their credit card balance in full every month, as personal loans and cash loans are widely available from Finnish banks, reducing the need for revolving borrowing facilities.

Another typical feature of the credit card market is that there are relatively few reward schemes currently available, which would give Finnish consumers an incentive to use credit cards more often. Of the few that do exist, they have been co-branded with Finnair, the national air carrier, although some issuers have begun the process of teaming up with larger retailers to implement loyalty schemes that give discounts on merchandise.

The concentration of Finland’s banking industry in the hands of a few pan-Nordic banking groups means that there is little variation in terms of credit card features or pricing, although banking services are structured a little differently compared to other European countries.

For instance, ATM or other payment cards are often automatically provided with bank accounts as part of a bank service package, which can come with different payment methods, and the pricing of these packages varies.

Pricing is also tied to the age of the consumer – in Finland, it is common for basic banking packages to be provided free of charge until the age of 27, with credit cards typically not levying an annual fee until after cardholders turn 27. Even then, Finnish consumers are afforded a degree of flexibility over fees, with some banks letting them choose to pay either a monthly fee or an annual fee.

At the moment, there appears to be little incentive or opportunity for foreign credit card issuers to enter the market, given the concentration of the banking sector, the entrenchment of debit cards and the miniscule number of people who revolve their credit card balances, so it is likely that Finnish credit card market growth will be focused on the international traveller segment or for usage in e-commerce for the time being.

Multifunction cards becoming popular

With little reason to push innovation in the credit space, issuers have been turning their attention to advancement in other areas, aiming to capitalise on consumer familiarity with debit.

A striking feature of the Finnish card market is the appearance over the past year of multifunction or combination payment cards, incorporating both debit and credit functionalities.

Banks, mindful of SEPA requirements for EMV-enabled cards which can be used across Europe, have begun replacing their proprietary ATM cards with internationally-branded EMV-enabled cards. Where Finland differs from the rest of Europe is that banks have tapped the functionality of EMV to offer dual debit and credit uses on one card.

Such cards allow customers making transactions in Finland to opt to pay by debit or credit at the POS when making purchases, with cards having both a credit card number (on the front of the card) and a debit card number (on the back of the card). The cards can also be used abroad, but in locations where merchants do not have EMV-enabled terminals, purchases are made using the credit application.

Issuers are effectively hoping to capitalise on consumer familiarity with debit by introducing credit to them on their existing debit cards, and expanding the number of locations where their cards can be accepted, while at the same time extolling the ease and convenience of using such cards on the internet.

In this regard, Finland could act as a template for other European countries and lead by example, much as it did when it significantly reduced cheque usage in the 1990s. It is expected that by 2011, EMV-enabled internationally-branded cards will have completely replaced traditional magnetic stripe cards.

However, the introduction of EMV and multifunction cards has not been without controversy. The Finnish Competition Authority has launched investigations into interchange fees on EMV cards – according to Finnish merchants, EMV and multifunction cards are more expensive to accept than old magnetic stripe cards.

Finnish processor and acquirer Luottokunta is at the centre of the investigations over how it divides interchange fees between itself and issuing banks, and the competition authorities are examining whether such fees run counter to Finnish trade law.

According to the Federation of Finnish Commerce, merchants have to pay the bank between zero and €0.05 ($0.06) for each transaction paid for using a traditional bank card, whereas the new cards charge 0.31 percent of the purchase value.

The Federation adds that if all traditional bank cards had been eliminated in 2008, the use of new cards would have resulted in extra costs of €63 million to retailers (and bringing the same amount of income to Luottokunta and the banks), but as expected that figure has been hotly disputed by payment players themselves.

Payment networks

Finland. Number of card transactions per capitaThere is a distinct lack of competition in the Finnish acquiring and processing market thanks to the existence of Luottokunta, a full-service card payment service company jointly owned by Finnish banks and merchants, and which is responsible for acquiring international Visa and MasterCard transactions. At present it manages more than 60 different card schemes. In 2008, those schemes generated total sales of €16 billion and commission income of €154 billion.

Visa is the dominant payment network in Finland, with around 4 million Visa-branded classic, gold and Electron cards in issue by the end of 2008. In 2002, Finland acted as the launchpad for Visa’s online authentication service, Verified by Visa, in a mass-market implementation instigated by Luottokunto and OKO Bank (later part of the OP Pohjola bank co-operative group).

However, in the corporate card sector, MasterCard’s Eurocard brand dominates, having been in the market for over 35 years. At the end of 2008, there were around 100,000 business Eurocards in issue.

Luottokunta has also developed the OP FleetCard, a charge card developed in conjunction with OP Pohjola. It comes in both FleetCard fuel and FleetCard charge formats, the latter of which is accepted at all MasterCard acceptance locations worldwide, including on the internet. Luottokunta has been pushing prepaid solutions as an alternative to corporate cards, such as a paper luncheon voucher which as of the end of 2008 was being used by around 82,000 people in Finland.

However, Luottokunta has announced plans to migrate the paper voucher onto a chip-enabled prepaid card.

In 2008, Luottokunta introduced contactless payment terminals to the market, and it also worked with Visa and Nokia to launch the world’s first mobile payment pilot project, whereby Visa’s EMV payment application was incorporated into the security chip of Nokia mobile phones.

In May 2009, Luottokunta will transfer issuance of Visa cards directly to Nordea, with Nordea being responsible for its own credit card portfolio. Nordea is implementing new credit account terms, such as proposals for new credit limits, and is also using the migration to implement new features, such as billing dates being selected by the cardholder, an option for cardholders to avail themselves of two instalment-free months in a year, and parallel cards with their own numbers and PINs.

Holders of parallel cards will also get access to internet banking services. Pricing structures of Nordea credit cards will also change – customers can select either an annual or a monthly fee.

Finland. Card transaction numbers and value

Major issuers


Nordea offers a range of Visa and MasterCard-branded cards, including Visa debit and Visa Electron cards. It also allows cardholders to personalise their cards with images such as family photographs. Nordea offers a selection of co-branded cards in Finland, including the Finnair card and the Stockmann multi-function MasterCard card in conjunction with the luxury retailer.

The Stockmann card offering incorporates discounts on home insurance, and other benefits such as real estate agents for those in the process of moving house, while the Finnair card enables cardholders to earn points for every purchase – for each euro spent, cardholders receive a Finnair loyalty Plus point.

The Finnair card also includes travel insurance and cash withdrawal cover. On the debit side, Nordea offers a Visa Electron card incorporating the ‘Plussa’ facility, a customer loyalty programme which offers points redeemable in shops belonging to the Plussa network.

OP Pohjola Group

As of September 2008, OP Pohjola Group, which comprises hundreds of co-operative banks across Finland, had 1.7 million international Visa, Visa Electron, Visa debit and MasterCard cards in issue, and over 530,000 cards had the K-Group’s Plussa bonus point feature, following the card co-operation started with the K-Group in 2007.

On the Visa side, Electron-branded cardholders can use the card to pay invoices via OP Group and Sampo giro machines, while the OP Visa card works as an ordinary debit card in Finland and a credit card abroad.

OP Pohjola also allows cardholders to use the text version of its internet service to transfer funds from their card to their account. MasterCard cards are offered to corporate and business customers only, and are accepted by around 50,000 merchants in Finland.

These cards come with an annual fee of €40. The MasterCard-branded corporate gold card can be used for debit payments, fuel purchases from card-operated pumps and cash withdrawals, but it cannot be used for payments abroad. The corporate gold card costs €1.67 per month and is debited from the company’s payment account.

Sampo Bank

Sampo Bank, the third-largest bank in Finland and now part of the Danske banking group, has a range of Visa- and MasterCard-branded cards available in Finland. It also allows customers to choose from a range of card designs featuring landscapes, sports stars and celebrities (such as the 2006 Eurovision Song Contest winners, heavy metal group, Lordi).

Sampo offers two cards with loyalty programmes – the Finnair Visa-branded card and the YkkösBonus MasterCard rewards card that allows cardholders to earn 0.5 percent MasterBonus points with all purchases, in addition to YkkösBonus points.


In January 2009, Handelsbanken teamed up with motorcycle maker Harley Davidson to launch the Harley Davidson MasterCard credit card in the Finnish market.

As of the end of 2008, Handelsbanken had around 250,000 cardholders, having launched its first MasterCard-branded programme in 2004.

Since then it has launched several co-branded and affinity card programmes in cooperation with retail chains and affinity organisations.

Finland. Card numbers

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