In 2013, a robber tried to hold up a branch of the Skandinaviska Enskilda bank in Stockholm only to be told: there is no cash here. Unfortunately for him, he had selected one of Sweden’s growing number of cashless banks.
As he trudged out of the building he asked: “Where else can I go?”
Well, good question.
The fact is, Sweden is on a mission to outlaw cash. People use cards all the time there. Swedish buses do not accept coins and notes. Nor does the Stockholm metro.
Over the border, Danish people don’t like using cash either. This is probably a good thing.
Because soon they might not even be able to.
According to The Danish National Bank, cash and cheques accounted for 80 per cent of all retail value in 1991. By 2015, it was 20 percent.
And this drastic decline looks set to continue. Especially as, in 2015, the Danish government made a proposal that businesses such as restaurants and petrol stations should no longer be legally bound to accept cash payments.
Fortunately for shoppers in the Nordics, there are many alternatives to coins and notes.
In addition to cards, there are digital alternatives – most of which depend on the smartphone.
In Denmark, there is Danske Bank’s MobilePay service. People can download this simple app, then link their bank details to their mobile number. From then on, they only need another MobilePay user’s phone number to make a payment.
Today more than 3.4 million Danes use the service regularly, making it the country’s third most popular app after Facebook and Facebook Messenger.
In Sweden, they have Swish, created in 2012 by six of Sweden’s largest banks. It’s almost identical to MobilePay and 52 percent of the Swedish population use it.
Another option is Seqr by Sweden’s Seamless. This uses a similar payment process, which is triggered when the user scans a QR code or taps on the NFC terminal. Over 30 million contactless card terminals now accept Seqr.
Of course, the new digital methods of payment are not just widening the options for shoppers. They’re also changing the world of retail. After all, if the phone is creating new ways to pay, shouldn’t it also create new ways to take payments?
Again, the Nordics are ahead here too.
In 2010, iZettle became the first mobile POS company in Europe. Its app and card reader package lets any retailer of any size accept payments on a smartphone. The shopper just inserts their card into a dongle, which is connected by Bluetooth to the merchant’s phone/tablet.
This was a big deal.
Before, it took weeks to purchase an expensive traditional card reading terminal. Now, a retailer could be accepted in minutes, and get a dongle for under 100 euros.
Even better, they could get more insight into their business by using one. While a ‘dumb’ reader just swipes cards, a mobile POS product comes with an app that can store and interpret payment data.
iZettle was soon joined by competitors such as PayLeven, SumUp and Jusp. They’re among the key players in a market that Transparency Market Research estimates will be worth $38.38bn by 2024.
However, these mobile POS innovators launched services based on plastic card payments. So they too have had to wrestle with the success of new purely mobile payment methods like Swish and MobilePay.
With these new payment systems, no reader is needed. Instead, the consumer simply pairs his or her phone with the retailer’s tablet. Technically, this is safer and faster for both parties.
The growth of these transactions clearly presents a problem for traditional PSPs (Payment Service Providers) that provide plastic card readers. At the same time, it is a huge new business opportunity for innovators prepared to embrace it.
And new regulation will accelerate thus process even more.
Why? Because of the EU Directive on Payment Services 2 (PSD2), which will be implemented this year. PSD2 will change payments by allowing Access to Accounts (XS2A). This means that banks will have to release APIs so that any third party – with permission – can access a bank account.
In effect, this will mean merchants can re-direct a shopper to an internet banking site or app. This will change the transaction from ‘pull’ (the retailer pulls the money from the account) to push (you push it to the merchant). These payments are fast and they give the shopper more transparency and control.
Some intermediaries are already helping retailers to switch to ‘push’ payments. They include Sofort, Ideal and Trustly. XS2A will make open the market up for them, and bring many new players into the market.
These increased payment options should make life easier for shoppers too. However, they could create more complexity for merchants.
This is where innovative digital start-ups think they can help. And, again, it’s the Nordics leading the charge.
Mobile POS companies including Wallmob, Sitoo, Shopbox and Ajour are trying to deal the final blow to the old cash register and card terminal. They are building systems that simplify these payment options. But more than that, they are offering merchants value added services (VAS) such as staff management, inventory, web shop and more.
And they have come a long way in a few years. Sitoo announced a strategic alliance with Klarna last year, Wallmob was founded and sold in less than three years to Visma, and Shopbox recently became the first European mobile POS company to partner globally with Microsoft.
These firms consolidate all payment options into one mobile POS platform. But more than that, they’re taking the many benefits of cloud storage, portable touchscreens and data visualization to give smaller retailers a new kind of mobile POS system – one available previously to only the biggest merchants.
Typically, these startups offer a tablet-based cash register that comprises three key features:
* Payments processing
* Reporting function
* Inventory function
Merchants download an app to go with the tablet, then use their VAT number to sign up for an account in minutes. They can then create stock items or categories, which they can click every time a payment is made. These mobile POS services work with virtually all acquirers and payment types – including purely mobile services like Swish.
They give merchants real business insight too. For the first time, they can see at a glance which items are moving, who is the best-performing employee, where stock is low, the busiest times of the day, week or year and so on.
Retailers can also use these systems for marketing. They can ask customers for mobile numbers or email addresses and then use the mobile POS to send outbound messages to entice customers back to the store.
The partnership between Shopbox and Microsoft provides a good example of this. They are creating an omnichannel app that can analyze data to reveal expected future revenue, auto-order new inventory and help send the right campaigns to the right customers.
Of course, merchants could do all of this – in theory – before. But realistically it was something only large retailers could afford and manage. With cloud-based POS, even the smallest businesses can access these same tools.
Needless to say, the new POS players believe that in future they can add even more valuable features to their services. For example, they could facilitate merchant financing by giving PSPs live access to high-quality credit score data.
Naturally, the PSPs are well aware of this. It’s why, all over the world, they are buying and partnering with the new POS specialists. In the Nordics, for example, the e-commerce payment giant Klarna partnered with Sitoo to make its online Klarna Checkout system useable in a physical store.
Shortly after, iZettle acquired the UK’s Intelligent-POS to create an integrated payment and POS solution for small businesses. And recently payment giant Nets announced a partnership with Shopbox to offer a bundled payment and mPOS solution to small business owners.
The war is on to make shopping more pleasant for consumers while making selling easier for retailers. In this war, a lot of cash registers will die. No more ‘ker-chings’, but hopefully a better and more seamless payment experience for everyone.