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January 10, 2018

Norway: Strong contactless growth on the cards

By Briony Richter

The card reigns supreme in Norway, with few individuals using cash on a daily basis and most possessing a minimum of two payment cards. Norway’s strong card and payment industry is the result of a robust economy, an efficient domestic debit card scheme (BankAxept), and increasing consumer appetite for credit. The average number of monthly card transactions and the average annual spend per card is higher in Norway than in more developed markets such as the US, the UK, France, Germany, and Australia.

Electronic payments have gained ground during the last 10 years, as the government has invested substantially in building long-term infrastructure for cashless transactions. Affordable and widely available financial products, a consumer preference for e-payments, a competitive marketplace, and a transparent business environment will aid the move towards a cashless society.

BankAxept is Norway’s only debit card scheme provider

The domestic debit network BankAxept, which is owned by Norwegian banks, has established acceptance coverage that covers the vast majority of the country. BankAxept operates on a no interchange fee model and has a strong acceptance network.

However, BankAxept cards cannot be used for online shopping and international transactions. This has led to growth in the use of international schemes such as Visa and Mastercard. Payment cards are thus co-badged with international scheme providers. All domestic debit card-based POS transactions and ATM withdrawals are carried out by BankAxept, whereas all international transactions and online purchases are carried out by international schemes.

E-commerce growth will support payment industry growth

E-commerce posted a CAGR of 14.9% in the four years to 2017. Norwegian consumers are happy to buy little and often online. Key drivers include a wider selection of goods available than in-store, easy to use online websites, and no duty charged on foreign purchases under NOK350 ($43.20). Conventional payment instruments, including payment cards and credit transfers, remain the preferred payment method among Norwegian consumers.

Mobile phone payments are gaining prominence

A growing preference for cashless transactions coupled with high smartphone penetration has led to a rise in demand for mobile payments. Alipay launched its operations in Norway in September 2017. The country’s first mobile peer-to-peer (P2P) payment solution, Vipps, was launched by DNB in May 2015. More than 100 banks now support this solution, which is used by over 2 million users.

Contactless adoption is on the rise

Contactless technology in Norway is in the developmental stage. To increase uptake, banks and scheme providers are attempting to differentiate their products by introducing new features. In December 2016, Oberthur Technologies (OT), a provider of embedded security software products and services, and Eika Alliance launched the first contactless dual payment card in Norway.

The contactless BankAxept payment card offered by Eika enables users to perform contactless transactions at more than 100,000 merchants in Norway. Previously, in June 2016 BankAxept partnered with Canadian debit network, Interac to accelerate the rollout of contactless and mobile payment solutions in Norway.

Prepaid card usage in Norway lags way behind debit and credit cards

Norway’s prepaid card market is still in the developmental phase, with card penetration of 2.2 per 100 inhabitants in 2017, compared to 161.8 per 100 inhabitants for debit cards. The low number of prepaid cards is due to the country’s 100% banked population. This indicates that there is limited use for prepaid cards, as the functionality of these cards is generally replaced by debit cards.

Gift cards remain popular prepaid cards in Norway. For example, DNB offers a business gift card in association with Mastercard. Employers can personalize the card by embossing the recipient’s name. Similarly, SpareBank 1 offers the SpendOn Visa Gift Card, which can be purchased from Rema 1,000 stores across Norway.

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