Norwegians stop using cash as Vipps payment app thrives
In the 1990's, Nordic nations led the way in telecommunications. Sweden's Ericsson and Finland's Nokia were then at the forefront of hand-held mobile technology. They were the Northern European driving forces behind the rapid growth of large-scale consumer mobile telecommunications. The decades have passed and we are now in the era of the multi-functional multi-media handheld device, and far beyond the mobile phone of old.
Aside from the social aspects, the possibilities are endless, as both merchants and consumers interact with great ease and convenience.
Digital payments, using mobile phones as a wallet, have been brought about by the desire of Norway's banks to work collaboratively with customers in developing a platform that is easy to use, instant and innovative.
There are some global operators in the space but the growth experienced in Norway by one company provides an insight into an almost total migration in the direction of digitisation, and away from cash.
It is common for people to stick to what they know. If it works, why change it? In Norway, many people didn't see a real need for such a digital payments service. But consumers who got a first-hand experience saw how it simplified their everyday lives and embraced it rapidly.
Since 2015, when Vipps was created by Norway's banks for the purpose of sending money as easily as sending an SMS, the company and App have become a phenomenal success.
Four years after its launch, Vipps has a market penetration of 3.3 million users, covering over 75pc of the population, Vipps has become the strongest brand in Norway.
In 2017, approximately one million instant payments were made, rising to 58 million in 2018. And according to the Norwegian Central Bank, most of these were instant payments made in the Vipps mobile payment app. There have been over 500,000 transactions via the App every day since 1st January this year.
Now just one in seven Norwegian transactions is in cash, nowhere in Europe do people use banknotes less often than in Norway.
Central to the development of the company in Norway has been the involvement of Norway's banks. The company is collectively owned by over 100 banks that use the Vipps app as a common platform.
The opportunities presented by digital payments are endless. Not only do they make the payment itself more efficient, but significantly contribute to making the user experience a lot easier; seamless and hassle-free when paying online. For example, splitting bills between friends in a restaurant on holidays, transferring pocket money to your kids anytime, and paying a bill with a click, while having them stored electronically.
The app makes it easier for small merchants to handle payments as people use their mobile everywhere, so having a handheld wallet means they always have access to their account on the go. Cash impacts across every element of society, business and individuals. And cash is expensive! If you are in business, cash has to be counted, stored and needs security, sometimes including sophisticated and costly secure transport arrangements.
Consumers who operate on a cash-only basis find it infinitely more difficult to access credit.
The biggest failure of cash globally is the under-declaration of income for the purposes of taxation. Nation states face numerous challenges arising from under-declaration or non-declaration of income.
In Norway, a country not dissimilar to Ireland in population with 5.3 million citizens, there are fewer transactions using bank-notes than anywhere else in Europe. If somebody pays cash in Norway, they are most likely to be a visitor to the country. Only 11pc of all payments are made in cash, according to figures from the Norwegian Central Bank.
In Norway, 0.37pc of GDP is related to the cost of the payment system in the country. Norway and Finland are leading worldwide on this. In spite of the limited cash in circulation in Norway, the cost of cash is still about 3 billion Norwegian kroner.
The vast majority of the cashless transactions referred to in Norway are conducted by smartphone, enabled by the strength of the network coverage in the country. It is therefore positive to note the introduction by the Irish government of the National Broadband Plan, which will play a central positive role in Irish society as it looks to a connected future.
The benefits of cashless payments are significant. They are more secure and safer, more convenient, instant, much more environmentally friendly and the users have total control and a record of their transactions.
Many countries are beginning to look at the Norwegian example and maybe Europe and Ireland are at the beginning of a change in attitude to cash, brought about by technology, digitisation and connectivity.
Berit Svendsen is executive vice president and head of Vipps International.