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July 8, 2019updated 27 Jul 2022 6:24am

Finland’s rush to cashless accelerates

By Patrick Brusnahan

Finnish consumers are prolific payment card users. Frequency of payment cards use is the fourth-highest globally, standing at 188.6 in 2018, behind only Denmark, Estonia and Sweden.

Finland is moving towards becoming a cashless society, with the central bank foreseeing a cashless Finland by 2029. Consequently, the share of cash in total payment volume fell from 33.5% in 2014 to 27.7% in 2018. A well-developed infrastructure, affordable and widely available financial products, the strong presence of alternative payments and consumer preference for electronic payments have led Finland towards being a less cash-dependent society.

Debit cards are the preferred card type for payments in Finland, accounting for 78% of the overall debit card transaction value in 2018. The average frequency of debit card payments reached 191 transactions per year in 2018 – significantly higher in than the 35 registered by credit cards.

However, credit card issuers are now using initiatives including instalment payments, reward points, discounts and cashback to attract customers. Meanwhile, the emergence of e-commerce and rising adoption of contactless payments will drive the payment cards market over the period 2018–2022.

Debit card penetration in Finland is adequate, averaging 1.5 cards per individual, supported by a strong adult banked population, which stood at 99.8% in 2018.

The introduction of Payment Directive 2014/92/EU – which requires all banks in the EU to offer a basic bank account at a reduced price, and account-switching facilities – contributed to a rise in debit card penetration. To complement traditional banks, mobile banks such as Holvi and N26 offer current accounts and debit cards.

The Finnish contactless payments market is growing rapidly. All major banks, including Nordea, OP Bank and Danske Bank, now offer contactless-enabled cards, while all the main mobile payment providers offer compatible technology.

There were 8.3 million contactless cards in circulation in 2018, up from 1.8 million in 2014. According to the central bank, the number of contactless payments grew twofold from 2016 and reached 376 million in 2017, accounting for 23% of all card payments. In value terms, contactless payments totalled €3.3bn ($3.8bn), or 7% of the value of all card payments.

E-commerce in Finland grew in value from $7.6bn in 2014 to $11.6bn in 2018, at a CAGR of 11.3%, much lower than its regional peers. The relatively slow growth can be attributed to lack of consumer familiarity with the channel, and low investment by retailers in this space. According to postal operator PostNord, only half of Finnish consumers aged 18–79 shop online on a monthly basis.

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