Danish Unimpressed With NFC Payments

Denmark is considered a poster child for modern payments in Europe. The country has one of the highest card penetration rates in the continent, and is in congruence with fellow Nordic countries in terms of its growing mobile shopping culture.

Mobile payments and NFC technology seem to be the hot new commodity in payments, and many have predicted NFC mobile payments will be popular worldwide, especially in the Nordic region.

But as tech-savvy and ambitious as Denmark is, could it be possible that NFC payments just aren’t for the Danish?

New research from the University of Denmark, “Decision-Making Under Uncertainty” by Morten Hviid-Andersen, challenges the viability of NFC payments.

The author evaluated the business potential of the new payment technology, and uses both primary and secondary data to determine whether or not the Danish market is likely to adopt NFC technology in the future.

The author focuses on three integral questions to guide his research and conclude if NFC devices are a good investment for Danish merchants: Is it real? Can we win? Is it worth doing?

PYMNTS.com finds out in this Research Review

Is It Real?

Is it real is another way of asking, is there a market, and is there a prevalent consumer need for the product or service? Companies launch new products and services all the time. However, consumers often don’t get the chance to even hear about the product before it abruptly reaches the end of product life cycle.

A new product can be the most innovative idea, but if there is no consumer need, then there is no business.

The author evaluated two crucial elements in Denmark: the current payments system and consumer trends.

In the last few years, there has been a rapid growth in smartphone purchases throughout the country. According to the study, a dominating 97 percent of Danish consumers own a mobile phone, 50 percent of which are smartphones.

Along with the rise of smartphones, mobile shopping has increased as well. About 21 percent of smartphone owners admit to making a purchase on their phone.

Many Danish consumers will use smartphones to buy cinema tickets, purchase music, grocery shop, order clothes and even purchase homes.

Despite the popularity of smartphones amongst the Danish, it is important to note that high smartphone use does not necessarily translate to an increase in NFC mobile payment adoption.

Denmark is a unique European country in the fact that cash does not dominate payments methods. Most European countries still prefer to use cash, but the Danish commonly use cards. The average number of times a Dane will use their card to make a payment in a year period exceeds the average of any other European country.

A big reason why Danes prefer to use debit cards to make purchases is because retailers with physical storefronts in Denmark are not allowed to add on any extra transactions fee to the consumer. This tells researchers that fees highly influence how Danes pick a payment method.

Can NFC Win?

The researcher looked deeper into the competitive advantages of mobile payments.

This stems from the previous question: is there a real consumer need for the product? Ideally, can NFC payments compete with card and cash transactions in Denmark?

Chances appear to be slim.

The author’s data indicated there is not a large consumer demand for mobile payments, but noted NFC was still in developing stages and this could change. Consumers in Denmark are not demanding NFC, and a large majority of respondents confirmed they had never even heard of NFC technology.

On the contrary, often times consumers are unaware of changing habits and needs, and must be told what they need. The lack of awareness of NFC payments is likely to be the reason that demand is low, thus there is still potential for raised awareness and increased adoption.

Is It Worth The Effort?

In regards to the current mobile payment services in Denmark, the research reported that because of the lack of business model agreements on a global scale, many merchants have held off on investing in mobile payment technology. These merchants include Danish banks and MNOs.

The lack of experience and knowledge of use has turned off merchants. The transition required to begin accepting mobile payments is also a very interdependent process, which is unappealing to many.

Instead of making major investments, merchants have instead opted to use inferior solutions that can be launched independently.

Danish financial institutions do not receive a profit on payment technology since current legislation stops fees being passed onto the customer when using debit cards. These regulations imply that merchants may have trouble earning a profit from investing in NFC-enabled instruments. Thus, motivation to adopt NFC payments may be quite low.

While mobile shopping continues to rise, mobile payments in-stores are expected to only account for a small percentage of Danish payments. Since the payment device is in its beginning stages, it is still hard to determine whether or not the investment would be worth making the switch.

In summary, NFC technology and mobile payments have yet to convince businesses of their benefits as a new payments options. If stakeholders are unsure about the profitability of new investments, they are not likely to pay for new technology.

This is especially true when so many Danish consumers are oblivious to its existence.

To read the full report click here.



The pressure on banks to modernize their payments capabilities to support initiatives such as ISO 20022 and instant/real time payments has been exacerbated by the emergence of COVID-19 and the compelling need to quickly scale operations due to the rapid growth of contactless payments, and subsequent increase in digitization. Given this new normal, the need for agility and optimization across the payments processing value chain is imperative.

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