The payment methods you can offer.
Even with hundreds of potential vendors and checkout solutions we can divide them into 7 distinct methods. Tap on an option to go straight to that method.
Credit or Debit card
In the early days of e-commerce, buyers were hesitant to leave their credit or debit card credentials online. They are not anymore! Even if it’s not as popular as it has been, there are good reasons to offer card payments.
In Norway, half of all online purchases are made with a card.
Pros: Coverage! Being able to use and accept payments from all over the world is the number one advantage for cards today. It’s a mature and well-established system that has been around for decades.
Some users might also prefer paying with cards to execute secondary services connected to the card, like insurances, points collection, or cashback.
Cons: Cards can be lost, stolen or simply expire. This creates a built-in, and unnecessary, churn for recurring payments or subscriptions. For users, having to manually input long strings of digits might also create frustration, especially for mobile or non-screen users. This can in some cases be fixed with a digital wallet.
Above all, card payments are expensive! The fees follow a transparent, yet complicated model called Interchange. Ever wondered why it’s so expensive? Here’s an article for you!
Digital wallets and mobile payments (Global)
When everything is turning digital, why not your wallet? That question has been asked by plenty of major tech-companies the last few years, resulting in a couple of popular solutions. Sprung from App Store payments or e-commerce, these have also become popular payment methods in physical stores alike.
Pros: Digital wallets removes the risks and hassle of manually entering credit card numbers, as well as minimizing the risk of phishing and scam. Since it’s based on card payments, it theoretically has global coverage. Consumers can use their digital wallets in both online stores with easy-to-use checkouts as well as in brick-and-mortar stores using their mobile phones or other gadgets. This increases the likelihood of creating a habit.
Cons: In reality, this is just card payments with a fancy suit. The physical card can still be lost, stolen or expire, making it useless also in the digital wallet. The same kind of fees are applied when a purchased is made with a card in a digital wallet. The adoption rate by the users in the Nordic has been slow, with Apple Pay in Sweden only being used by 8% of consumers.
Digital wallets and mobile payments (Local)
If the penetration of global Digital wallets has been weak, the same cannot be said about some local actors. 8 million Swedes are using Swish, Vipps has got 3 million Norwegian users and MobilePay is downloaded on 90% of all Danish smart phones.
Just like their global siblings they’ve managed to take complicated payments and made them simple by adding a “layer” of technology on top of another process, be it wire transfers or card payments.
Pros: Once up and running these apps are streamlined and easy to use. Nifty features like saving favourites, splitting bills and paying with QR codes are popular among users, contributing to their spread.
Cons: These payment methods are, currently, limited to one or two Nordic markets, so pan-Nordic businesses would need to individually integrate all of these. They are also often limited to a certain card (that comes with fees) or a certain account (that limits its usage). In many ways these payment methods have become popular, and possible, due to their ease of use, but in the end they bring very little innovation to the payment space.
Honestly, you don’t really need any other actors for this than a simple e-mail. That’s probably why so many vendors exist for this payment method where Klarna is one of the brightest actors. If you’re selling products or services infrequently and don’t want to pay fees or integration costs, invoicing might be a good selection for you.
Plenty of Swedish (33%) and Finnish (23%) consumers prefer this payment method, while it’s only 2% of Danish consumers.
Pros: Varying on your selection of solution, invoicing can be really cheap or even free. It’s also common to charge the recipient for the invoice, ranging from 3-8 EUR. However, to keep that cost down it requires manual labor, so it’s only a viable solution for rare occasions.
Cons: There are plenty of downsides with invoicing, even if modern providers solve a few of them. The most obvious one is that you have to wait for payment to arrive. Even if you, as a merchant, set the payment terms a customer expects around 20-30 days until due. Services like Klarna fixes that issue by paying you directly, and the collecting the payment from the customer, but it’s not for free. There’s also a risk of you sending goods or delivering on services that are not being paid at all, leading to cumbersome legal processes.
A very common payment method in the cradle of e-commerce was manual bank transfers. Not entirely different from invoicing it required very little technical integration on the e-commerce side. Once an order was made online, a merchant could display or send out payment details including bank account and an order ID. When payment was received the order would be handled.
A bank transfer can also be made by physically going to a bank and making a payment, or wire transfer, even with cash. If that’s a Pro or a Con we’ll leave up to you to decide.
Pros: All you really need for this is a bank account and a way to identify what payments belong to what order. It used to be a “safe” way for consumers to make a purchase, because the consumer never left any vulnerable information, like credit card numbers.
Cons: It’s cumbersome, have long settlement speed and is prone to human mistake. There’s a reason to why manual bank transfer has evaporated from the face of online payments; users don’t like it. Even with the apps and web sites of modern banks, it’s plenty of steps to cover in many different interfaces to finish a payment. It’s like watching Jaws on VHS. Great flick, sucky tech.
A manual bank transfer is not to be confused with a more modern, user-friendly Direct payment with open banking technology.
Open banking payments (aka Direct payments)
Driven by modern technology and EU directives open banking has become a word on many merchants minds the last few years. Even if that covers way more than “just” payments, it’s having a big impact on user behavior and preferred payment selection. The concept is as simple as an old school bank transfer, but with a payment provider facilitating the process. The payment provider connects to the banks API services and provides the consumer with an easy-to-use interface and Strong Customer Authentication (SCA) like NemID, BankID or similar.
Pros: Direct payments are safe, user-friendly and versatile when it comes to channels and amounts. The uncomplex technical structure makes room for lower costs and faster settlement time. The consumer don’t need any third party apps or memberships, only their bank account and a way to identify themselves. The payment can be initiated with a link on a website, but can also be sent in a text message, or accessed through a QR code or NFC-chip, making the possibilities almost endless.
Cons: The EU directive only covers the EU and United Kingdom. Also most actors are available only in a handful markets, so choose one that fits your needs.
Buy Now, Pay Later (BNPL)
Let’s be honest. Klarna is the largest provider of Buy Now, Pay Later services in the world and they are particularly strong in the Nordics. The consumer takes a micro-loan to pay for their purchase. As a merchant you’re getting paid instantly, but the consumer pays later or split up their payment into bits and pieces.
Pros: Just like invoices, a consumer can make a purchase, receive their goods and then decide to pay, minimizing risk on their end. A merchant don’t have to wait more than a few days to get paid.
Cons: In Sweden, there is a law that regulates how much a merchant can promote credit purchases in their checkout, due to increased over-indebtedness. Offering BNPL might lead to over-consumption and putting your clients in debt.
Others – Pre-paid, vouchers, gift cards and cash-on-delivery
Yes, there are other ways of making payments online. However, none of these has any traction on the Nordic market and should only be considered in very specific situations.
Select a payment method that’s safe, easy to use and reliable.
When we dissected the four most popular payment methods in Sweden and compared them side-by-side, open banking Direct payments came out on top. It’s safe, very user-friendly, works on all types of digital channels, no limitations on the amounts you can pay, you can switch between different accounts, you can initiate the payments in SMS, e-mails, apps, websites, and more. The settlement is very quick already now and with P27 it’s going to be instant all over the Nordic region.
However, it’s not one payment method to rule them all.
As long as you understand how your selected payment methods affects you conversion rate, you customers and your bottom line, a mix of methods is the best approach. Direct payments should always be a first choice in the checkout, but backing that up with card and mobile payments is still a good idea. If your products can justify it, consider using BNPL or invoicing as a secondary or tertiary alternative.