With more than a month to go before the Instant Credit Transfer ( ) scheme is live, we were eager to hear the lessons learnt by one of Europe’s frontrunners in instant payments, Denmark. We interviewed Kristian Ring from Finance Denmark, and he explained the reasons for card payments’ (including contactless) success in Denmark, and more generally the Danes’ appetite for new technologies. The takeaways from this interview are full of insights for many other communities actively working on the modernisation of their payment systems, starting with the adoption of the scheme. In addition, don’t miss our infographic about the Danish payment landscape.
Q. Denmark already has a successful instant payment experience. Can you tell us more about it?
Instant payments were introduced in Denmark in November 2014 with the implementation of ‘Straksclearing’. This is an instant payment solution, which enables instant credit transfers 24/7/365 up to a limit of five hundred thousand Danish kroners (equal to approximately sixty-seven thousand euros). The solution is targeted at both citizens and firms.
Straksclearing is based on prefunding, where banks provide liquidity at the Danish National Bank in advance. The actual settlement in the Danish National Bank happens in six cycles during the day.
The customer will experience a transfer of funds from account to account within a few seconds. Many online banking solutions offer instant transfers as default for credit transfers, while other payment service providers ( ) charge a small fee. Most online banking solutions are available both on a computer and a mobile device. But most Danes will make their instant payment using the MobilePay app hosted by Danske Bank with the participation of most of the Danish banking sector.
Q. Based on this experience, what advice could you give European who are getting ready for the scheme? When does Denmark plan to adhere to it?
First, you have to understand that instant does mean instant. The transfer has to take place within seconds, and the banks need to be able to process this in their systems. Also 24/7/365 means no closing for bank holidays or long maintenance windows.
Second, be prepared to start providing your customers with instant services that are user friendly and (virtually) free of charge, as they will quickly expect this to be the new norm. And there will be a whole range of uses that you haven’t anticipated.
MobilePay was only introduced in Denmark in 2013, but today more than sixty percent of Danes (including infants!) use MobilePay, with more than 180 million transactions per year.
Third, if you cooperate within the sector in providing user-friendly products you will get widespread usage very fast. And if you are not ready to provide this kind of service to your customers, they might look for other providers.
As for adherence to the new scheme, Danish banks are considering their options. Since Denmark is not part of the euro zone, this is a voluntary process that is not coordinated by Finance Denmark. We expect some banks to adhere, but we have no concrete status report to share at this moment.
Q. Card payments represent an overwhelming share of more than eighty percent of electronic transactions in Denmark. How do you explain this appetite for cards? How broadly are contactless card payments used?
In 2016 the average Dane used his or her payment card about 330 times. An important factor stimulating the appetite for cards in Denmark is undoubtedly the fact that a domestic payment card, Dankort, was introduced as early as 1983.
In the introduction phase in particular, Danes felt comfortable with the national Dankort solution that was free of charge for consumers and retailers but had the same features and advantages as international credit cards, albeit only for domestic payments. However, since 1988 it has been possible to co-brand VISA with the Dankort, so that a broader audience can use their preferred card abroad.
Since 2001, retailers have paid a very small fee for each domestic Dankort transaction – at present an average of half a Danish kroner or 6.7 eurocents, but the card transaction remains free of charge for consumers, both when used in shops and when taking out cash from your own bank’s ATMs.
Contactless cards were introduced in Denmark at the beginning of 2016, and have already reached a usage of more than twenty-five percent of all domestic card transactions. The threshold for contactless payments is two hundred Danish kroner (equal to twenty-seven euros), but an increase in the threshold is being discussed due to perceived higher security, i.e. the PIN cannot be intercepted by criminals when used.
Many card transactions naturally mean fewer cash transactions.
The balance between cards and cash tipped in the 2000s, and since then payment cards have been the dominant means of retail payment in Denmark.
According to the most recent estimate of the share of cash payments in retail trade, cash accounted for only twenty percent of the aggregate value of all payments in 2016. This number is still falling.
Q. Finally, a broader question. In Europe, Danes are seen as the frontrunners for anything digital, including payments, but more generally in the use of digital technologies, especially in the public sector. What is Denmark’s secret for succeeding in these areas when many other European countries appear less advanced?
The very basic foundation for the widespread trust in digital technologies in Denmark is the CPR number introduced in 1968, a unique identification for all residents of Denmark. It is operated and supervised by the Ministry of the Interior.
The CPR number is used for all dealings with the public sector (e.g. tax, land registry, health and social benefits) as well as a number of commercial companies, including banks and telephone firms, where unique and safe identification is needed.
Using the CPR number, which guarantees the identity of any Danish resident, a digital signature, NemID, was developed and introduced in July 2010 as a public–private partnership. The financial section was behind the introduction of the digital signature from the very beginning, having for some time worked to develop a common secure sign-on mechanism for e-banking solutions. The banks use the NemID as identification in their online banking solutions, and a new version called MitID developed as a public–private partnerships is on its way.
Furthermore, the Danish government has used legislation to spur digital development. It has been mandatory for Danish citizens to access a wide range of public services using public digital solutions and their NemID as identification and also for all citizens to receive public digital post via a publicly owned web interface. More than 100 million digital letters were sent to the 5.7 million Danish citizens in 2016.
Infographic: The Danish payment landscape
(click to enlarge and download)
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