Average monthly card transactions and average annual spend per card are higher in Sweden than in other European markets such as the UK, the Netherlands and Germany, although they lag behind Sweden’s Nordic peers of Denmark, Norway and Finland, according to new research by Timetric
Swedish consumers are prolific users of payment cards. Payment card use in Sweden has been driven by concerted efforts by the government and banks, and consumer willingness to adopt them.
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As a result, payment cards are gradually replacing cash, and are now used even for small-value transactions at newspaper vendors, homeless magazine sellers and for church donations.
The Swedish government’s focus on a cashless society – supported by retailers’ reluctance to accept cash – led to an overall increase in payment card transaction volumes.
For instance, retailers such as Kungsaengen, the mobile phone retailer Three and the mobile service provider TeliaSonera do not accept cash payments.
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By GlobalDataOverall, the Swedish payment cards market grew at a compound annual growth rate (CAGR) of 8.58% between 2011 and 2015 in terms of transaction volume, and 1.95% in terms of the number of cards in circulation. A similar trend is anticipated from now to 2020.
In Sweden, card-based payments overtook ATM cash withdrawals in 2002. The increase in POS terminals has been paralleled by a substantial increase in the use of payment cards, with the volume of card transactions at POS terminals increasing substantially to 2.8 billion in 2015, accounting for 92.9% of the overall payment card transactions, indicating a rising preference for cashless payments among Swedish consumers.
The Swedish government has taken initiatives to bring the entire population into the banking system. According to the World Bank’s Global Findex survey 2014, the percentage of the Swedish population aged 15 or above with a bank account reached 99.7% in 2014. This resulted in the high penetration of bank accounts and products such as debit cards.
Central bank measures to tackle deflation
The central bank of Sweden is using the repo rate to tackle deflationary pressure. The repo rate was reduced from 1.25% in December 2010 to 0% in October 2014, a rate that was maintained until the end of 2014.
With the low repo rate, bank lending grew, resulting in an increase in consumer spending and economic growth.
To combat deflationary pressure, the central bank decreased the repo rate to -0.10% for the first time in February 2015, and to -0.35% in November 2015, resulting in negative returns on savings and deposits with commercial banks. As of April 27, 2016, the repo rate was -0.50%.
The move led consumers to spend rather than save money in banks. The rise in consumer spending is expected to drive payment card transaction volumes and values.
Contactless still at a nascent stage
Despite consumers being prolific users of payment cards, the adoption of contactless cards is still low in Nordic countries such as Sweden, in comparison to other European countries such as the UK and France.
At the end of 2015, it is estimated that there were only 100,000 contactless cards in Sweden.
According to Timetric analysis, the low adoption of contactless is primarily due to lack of bank promotion, although ICA Banken has issued contactless cards and has NFC-enabled terminals; it plans to issue 560,000 contactless cards by the end of 2016.
With the rising number of small businesses and street vendors accepting payment cards for small-value transactions, the introduction of contactless technology is anticipated to further drive payment card transaction volumes over the next five years.
