The Nordics head towards invisible payments

In an interview with The Paypers held during Money20/20 Europe in Copenhagen, Jørgen Stråtveit (Senior Vice President, Card Processing) and Hans Henrik Hoffmeyer (Senior Vice President, Mobile Services) of Nets share their insights on the Nordics’ favourite ways to pay and the role of financial services in creating digital identities, as well as breaking down the event’s key takeaways.

Hans Henrik Hoffmeyer explains that fundamentally, Nets is a technology company, specialising in powering digital payments. “We serve more than 240 banks in the Nordics, supporting them with more or less everything related to cards, card issuing and processing. Besides banks, Nets also works with more than 300,000 merchants, of which over 30,000 work in an online environment. Our role is to process transactions by creating and managing payment infrastructures and our main customers are banks, merchants and corporates in eight countries across the Nordics and Baltics.”

Nets has over 240,000 corporate customers, processing IT solutions such as eFaktura, AvtaleGiro and BankID in Norway, and Betalingsservice, and NemID in Denmark.

How do you cater for each business segment you address?

JS: In terms of products, we help merchants with acquiring, both in-store and online, enabling them to accept Visa, Mastercard, and domestic card schemes (like BankAxept, Dankort, China UnionPay etc). We are a one-stop-shop where you can get all the payment instruments in one terminal.

When working with banks, we enable them to issue cards, manage dispute processes, and everything related to payment card management. Nets process more than 35 million cards to the customers of Nordic banks and we also manage their transactions to ensure they are secure. We also support issuers implementing mobile payments - much of the technology showcased at Money20/20 Europe was related to the future of payments.

The introduction of card-based or ‘Dankort’ payments on the mobile phone marks a seemingly small but highly significant change in the way we pay for goods at stores. To simplify the checkout process, and to make the payment process truly frictionless for consumers, Nets has also introduced digital receipts. Our aim is to provide solutions for the whole ecosystem and ensure that merchants, issuers and acquirers are all well connected, in order to provide end-users with the best possible experience.

Biometrics, particularly finger vein technology, are the next step in the journey from physical cards to more customer-centric payment experiences. The technology is there - it will be retailers who set the pace.

Can you tell us more about the Nordic’s journey towards mobile payments?

HHH: The Nordics are very tech savvy. We embrace new technologies and have high smartphone penetration, so we were not surprised by the fast adoption of mobile payments by consumers, especially for P2P payments.

JS: When we introduced contactless cards, we saw immediate adoption - in less than two years, a quarter of all transactions became contactless. This clearly demonstrates that if you offer consumers solutions that provide a faster or otherwise better experience, they will embrace them. Nevertheless, mobile payments need to provide some added value beyond the contactless payment, as contactless cards can already provide this. This could be achieved with digital receipts, loyalty schemes, special offers, and other services that bring the merchants closer to the consumer.

What about mobile wallets usage in the Nordics?

HHH: If mobile payments is a journey, one possible destination is replacing the entire physical wallet, comprising of your payment cards, driving licence and even medical cards, with a digital wallet. Therefore, your mobile wallet is no longer a tool for making payments, but where you store your identity.

JS: To store digital identities safely and securely we use tokenization. However, the integration of medical cards and other identification with mobile wallets requires public authority - the government will need to make some decisions. 

For digital driving licences, or the digital cards issued by doctors, different technology to that which enables payments is required. We welcome the future integration of payments and identity storage, and until that time we will create and manage mobile wallets that enable all payment choices, whether it is Visa or MasterCard or a local domestic card scheme, such as the Dankort in Denmark.

The digital landscape must deal with trust issues, focusing on compliance, security, and data protection. How do you secure that trust with your customers?

JS: Ecommerce is currently experiencing two-digit growth. In 2015, the value of online shopping increased by 13% to EUR 17,3 billion in the Nordic countries, yet at the same time we are observing rising levels of fraud, especially in ecommerce transactions. It is extremely important to create a safe and secure online shopping experience that, at the same time, does not introduce too much friction for consumers. To do that, a global solution for ecommerce authentication has been created: 3-D Secure. The basic concept of the protocol, marketed as “Verified by Visa” and “Mastercard SecureCode”, is to tie the financial authorization process with online authentication.

We offer 3-D Secure Risk Based Authentication services to card issuers to deliver an easy and secure way of shopping for their cardholders. The service is offered to all card issuers and is interoperable with all consumer management systems (CMS) used by issuers.

After attending Money20/20 Europe, could you share with us your key takeaways?

HHH: If you attended the 2016 conference, you would have seen a very strong presence from the big tech players and then the smaller fintechs, who spoke on panels but not the mains stages. Now, there’s much more equal representation.

There is an industry consensus that collaboration is the future. If you take this major change into the mobile space, it will ensure digital innovation around mobile that will increase mobile payments adoption. Banks do not see us as competition, but as an opportunity to work together and achieve even more.

Another key takeaway for me was the difference in attitude towards PSD2. A year ago the financial ecosystem saw the legislation as a major challenge to overcome. Now, everyone is looking for business opportunities. This is a new dawn, both in terms of fintech collaboration with established players, and opportunities to capitalize on new business models.

JS: The first thing I noticed was the leaps and bounds made in the actual technologies.
If last year we just talked about it, this year we are presenting clear examples of real problems that are being solved by the use of new technologies in terms of mobile payments, lock screen payments and Touch ID using finger vein authentication.

Furthermore, fintechs and technology pioneers are creating immersive and experiential purchasing journeys, developing everything from VR to AI to digital loyalty, which will fundamentally change the reality of retail.

About Jørgen Stråtveit

As Senior Vice President for Card Processing, Nets, Jørgen is responsible for both the P&L and strategy development and execution within Nets’ processing arm across the Nordic and Baltic region.

About Hans Henrik Hoffmeyer

As Senior Vice President for Mobile Services, Nets, Hans Henrik sets the strategy and manages the development and commercial rollout of innovative and scalable mobile payment services.