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Denmark: A Model for Mobile Payments?

While this would be a strictly cash business in the U.S., hot dog stands like this one in Copenhagen frequently accept payment cards, and, increasingly, mobile payments.

For years now, it’s seemed as though the “age of mobile payments” has always been just around the corner. Apple Pay launched in 2014, followed shortly thereafter by solutions from Google and Samsung, leading many to believe our payment cards would soon become relics of the past. Peer-to-peer services like Venmo and bank-sponsored offerings like ChasePay and Zelle were going to obviate the need for cash in smaller transactions, whether between friends or at the corner store. With each passing year it seemed, we saw another solution that was going to be the “magic bullet” that finally brought us into the age where the smartphone supplanted the physical wallet. Fast forward to today, and only 20.2% of the U.S. population have used mobile payments in a point-of-sale transaction. By contrast, China seems to be leading the world in mobile payments, thanks to WeChat and Alipay, the latter of which claimed over 1 billion users at the start of 2019. Though some have argued China has an advantage over the developed world given the lack of a previously incumbent card payments infrastructure, a recent trip to Copenhagen would suggest otherwise. Denmark, and for that matter Scandinavia as whole, is offering the developed world a glimpse into the future of ubiquitous mobile payments in the developed world.

Early on in my visit, I became quite curious about the MobilePay signs I seemed to be seeing everywhere. I quickly learned that this is Denmark’s leading mobile payments solution. Though it started primarily as a peer-to-peer payments system (a la Venmo), it soon expanded into business payments as well. With all of the country’s major banks as partners, MobilePay has managed to achieve a 90% penetration rate nationally in just six years. Given the flexibility of the solution, it is easy to understand why: not only is it “bank-neutral”, it is also “technology-neutral”: you can set up a payment using a store’s 5/6-digit number, a QR-code, or by putting your phone up to a payment terminal. Once you do so, the amount to be paid appears, and you approve the payment with a swipe. Given the wide range of options to implement the system, businesses could be as high or low-tech as they wanted when it came to implementation, allowing for rapid adoption. While cash and cards have by no means disappeared in places like Denmark, the ubiquity of mobile payments is noticeable, and in some cases, surprising. While many would expect a supermarket or a convenience store to adopt these solutions, MobilePay was also in use at a hot dog cart and a 100-year old pub, the types of places I’d expect to see a “CASH ONLY” sign in the U.S.

Visitors to other parts of Scandinavia will find similar systems in use with the same frequency- 3/4 of Norway uses Vipps, and in Sweden, the use of Swish has become so common it is used as a verb. In the rest of the developed world, the mobile payments space remains fragmented, creating an often-frustrating experience for users. Scandinavia may offer a model for how to change that: institutional cooperation allows for more rapid adoption (everyone gets involved quickly, leading to rapid network effects), and ease of use allows for better retention (everyone wants to stay involved, cementing dominance of the system). Should markets like the U.S. take note, widespread mobile payments may (finally) become a reality.


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