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May

1813:31

Banking on the digital future

 
Denmark's enthusiastic deployment of digital technologies is laying the foundation for a cashless society where the smartphone is central to commerce

For eight days, the 160,000 person strong Roskilde Festival will go completely cashless, issuing special refillable debit cards linked to ticket-holders.

“We’re only doing this because it will make things easier for the people buying and selling stuff at the festival. Which means everyone,” a press release declared, adding that credit and debit cards will still be accepted.

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It’s the latest example of how cash is disappearing in Denmark – a digital transformation driven by the government, industry, and mobile devices. Some enjoy the ease of mobile payments and banking, but other segments of the population are threatened by the disappearance of cash.

Rise of Fintech
The constant push to cut costs and the explosive growth in financial technology (fintech) are accelerating the shift toward digitisation, and banking in particular is undergoing great change. Fintech investment has soared in recent years, increasing from just 2 billion USD in 2013 to 15 billion USD three years later. Over the same period, mobile payment systems increased their share of cashless purchases from zero to three percent.

At the same time, the amount of cash in circulation continues to fall. In 2000, cash accounted for 60 percent of all purchases in Denmark, falling to just 20 percent last year. Shops are still required by law to accept bills, but proponents of a cashless Denmark are in the driver’s seat, especially as the digital payment industry becomes more competitive and grows in scale and market share.

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Going cashless is about convenience, increasing productivity, lowering costs, minimising crime associated with cash, and helping the environment, according to the World Economic Forum’s digital transformation initiative, where Danes are leaders in internet readiness. In 2015, 85 percent of the population aged 16 to 74 surfed the net daily, and 79 percent executed online transactions. Mobile connectivity is high too, with smartphones in the pockets of more than 80 percent of the same group.

As conditions for a digital economy ripen, legislation required to bring Danish rules into compliance with European law will be implemented by early next year, likely moving the Nordic nation further down the digital rabbit hole. The Danish Payments Council – a forum chaired by the National Bank – has already expressed an interest in imitating Sweden, where retailers are no longer required to deal in cash.

Retailers may want to move away from cash for a number of reasons, among them security. As consumer use of cash has fallen, so have holdups of petrol stations and banks. There were 135 bank heists in 2010, but that number had plummeted to just 16 by 2016. The disappearance of traditional targets is a huge factor, with only 54 of Danske Bank’s 120 branches providing cash services in 2016.

The future is mobile
The government’s Digital Strategy 2016-2020 embraces the fourth industrial revolution being ushered in by digitisation and the rise of fintech. According to the 2017 European Digital Transformation Scorecard, Denmark is one of the top enablers of digital technology, ranking second only to Ireland in integration, second only to the Netherlands in infrastructure, and best overall in the supply and demand of digital skills and labour.

No doubt attracted by these favourable conditions, Facebook and Apple recently announced plans to open huge data centres around the country.

READ MORE: “Everyone has the right to information

But for Denmark to truly become a digital champion, a technology pact is required that obliges business, academia and government to harness public-private investments and streamline integrated digital solutions in a competitive but collaborative environment. So argued Finance Minister Brian Mikkelsen (Konservative) in a recent speech to the Confederation of Danish Industry. His vision will see smartphones accounting for 50 percent of all payments by 2020, and a cashless Denmark in 10 to 20 years.

Meanwhile, competition in the mobile payments industry is heating up. MobilePay from DanskeBank is currently the most popular platform, but it is now being challenged by Nets, which has launched Dankort Mobil. The eWallet connects a user’s Dankort debit card to their smartphone, which they can then use for contactless payment at the checkout.

While other competitors have failed to challenge MobilePay’s dominance, Nets stands a chance because Danes trust the nationwide Dankort system. Worth almost 30 billion kroner, Nets expects to capture 75 percent of Denmark’s four million mobile consumers, and has already struck a deal with supermarket chain Netto to remove MobilePay from its 461 locations.

READ MORE: Sleepwalking into the future

John Strand of Strand Consult, however, argues that MobilePay is the most user-friendly platform in the world, and says Nets’ strategic partnership with Netto demonstrates their choice to “give big chains good transaction prices and rip off small retailers and consumers.”

“Danske Bank created an absolutely great product that people love. It’s a disruptor that’s proven it can continually improve,” says Strand, adding that they have launched the service MobilePay Subscription to compete with Nets’ Betalingservice.

Homeless and elderly
While the majority of Danes gleefully embrace the digital transformation, the elderly and homeless are left behind. Almost a quarter of a million Danes over the age of 65 do not use the internet, according to data from Ældre Sagen, an advocacy organisation for seniors. They worry that the elderly will be disenfranchised by legislation that allows shops to refuse cash payments at certain times or in certain high-risk neighbourhoods.

“That’s not true,” claims Henrik Theil of the Danish E-commerce Association, pointing to the increasing number of elderly using digital technology. In 2010, 516,000 people over the age of 65 had never been on the internet, compared to just 224,000 in 2016, according to Statistics Denmark. “The only area where Danish seniors are falling behind is in the use of smartphones,” he admits – this demographic was responsible for 22 percent of online sales in 2016, even though only 65 percent have smartphones.

Plans to integrate the homeless into the ongoing mobile metamorphosis are also materialising. According to Rasmus Kristensen, director of the homeless magazine Hus Forbi, sellers are challenged because fewer people carry cash to purchase a magazine. So Danske Bank has provided 35 vendors with special debit cards that work with MobilePay to collect payments. Eventually, 500 Hus Forbi vendors will gain access to a digital payment system.

David Skov (above) sells about 20 copies of Hus Forbi along the walking street Strøget in Copenhagen every day, a number that has not changed. “Not yet,” he says, expecting sales to drop as cash disappears from circulation. While he has a smartphone and a digital signature, called NemID, financial services are still out of reach for him

“Danske Bank won’t allow me to open an account.” M

The May 2017 issue of The Murmur with historian Adam Holm on the cover.

Tech

By Bradley Axmith

Translator, day trader, web designer, amateur viking ship builder and martial artist.

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