Payments in Denmark under the shadow of Dankort
The first in our series of payments in different countries. We start with Denmark.
Denmark is an interesting case as it was one of the first countries to go plastic with the Dankort debit card scheme in the 80s. Often early innovators see very different problems than late comers.
Payment types in DK
Visa/Dankort by is far the largest payment form on the internet by around 75-80% of all ecom transactions. There are still a few pure Dankort without Visa around, but not many.
Thereafter it is Visa and Mastercard for around 20% and the rest is ebanking payments dominated (Nordea and Danske Bank), Amex and Diners.
It should be noted that Visa/Dankort is a special Danish debit card with combined Visa and Dankort branding. When we mention Visa on it’s own it is generally a Mastercard.
Trend towards Visa and Mastercard
Over the past 2 years the fastest growing payment type has been Visa and Mastercard as opposed to Dankort. The reason can be 2 things:
- Consumers do crossborder commerce more than ever and of course needs a payment type to enable this.
- The biggest issue in the Danish online merchant market at the moment is that if they don’t start selling crossborder they will loose the ecommerce game to foreign sites.
Problems with Visa/Dankort special rules
The Dankort system has special rules by law. Designed to promote low fees for consumers and merchants, there are some significant issues with them that most Danish consumers are not aware of. In particularly concerning security:
- No support for 3D secure for domestic Visa/Dankort transactions.
- The payment processor just checks the card against a blacklist and returns ok without a balance check (leading I’m sure to fantastic overdraft fee income for the banks).
- No customer protection if merchant goes bankrupt. In a famous case a discount aircarrier went bust and only Credit Card holders received refunds. Visa/Dankort holders received nothing.
Payment Processors
DIBS process around 75% of all DK e-commerce transactions. The rest consists of small players like Quickpay, Epay, Pensio, Payex, ewire and PayPal.
PayPal has been around for a long time in the Danish market. While they are still trying they haven’t so far achieved a significant marketshare in Scandinavia.
Invoice payments
The big thing in payments in Scandinavia has been invoice payments, where the customer receives a short term credit decision and pays on receipt of purchased item.
Klarna, PayByBill and Svea Webpay are all trying the Danish market after their success in the other nordic countries.
Acquiring banks (merchant banks)
The only really big player is NETS the old payment monopoly (previously PBS) owned by the Nordic banks.
Teller a company in the NETS family who does credit card acquiring in Scandinavia.
Furthermore a lot of new acquirers has entered the market. In particular Swedbank, Euroline, Barclays, Nordea.
This could be because SEPA could mean that the Dankort scheme needs to be closed. If this happens 75% of all transactions could end up in the free marketspace.
Another likely reason for entering Denmark could be the monopoly based pricing NETS has enjoyed which has been 1,25% for domestic transactions and 3,75% for all cross border transactions! They have also had a incredibly long default settlement period of 28 banking days!!!
Person to Person Payments
The vast majority of Person to Person payments are done through online banking. It is very common for people to publish their bank account numbers on their website and email it out to friends for group purchases of trips etc.
Bitcoin
While Bitcoin is still a miniscule part of the Danish payment market, the first Danish bitcoin exchange Bitcoin Nordic has been launched.
They are able to sell Bitcoin to customers with Scandinavian issued cards through ewire as well as international and SEPA bank wires.
There is even one hair salon accepting bitcoin.
Major issues
The biggest issue has been the Dankort monopoly owned by NETS. Until recently it was common for supermarkets and many businesses to not accept foreign credit cards.
The Dankort monopoly has also meant that there has been a large amount of red tape to jump through for online merchants. In particular startups.
What about your country?
Would you like to write an overview of payments in your country? Please email me at pelle@picomoney.com.
3 Responses to “Payments in Denmark under the shadow of Dankort”
Anders says: In what you wrote, I only saw a “problems” and a “major issues” section related to the Dankort. I think that it is rightful to say that the early adaption also had some major advantages. For example, the whole paper-flow around checks almost totally disappeared in the ’90s, which I am sure simplified business processes for many. So I think the Dankort was really a major factor in the whole country ‘going electronic’ very early compared to other countries.
It is a different time now (although most countries still drown in checks, including the US – I so do not understand that part), and no reason for the Dankort in its original format and should just be an option now – it has served its original purpose already.
Very good point Anders.
I agree that Dankort was extremely beneficial, but they should have updated the system at least 10 years or go I think.
We were buying things using our Dankort and pin in supermarkets in the 80s, where that only really became common in the US in the last 10 years and other parts of Europe since the mid 90′s.
Early innovation though tends to cause later stagnation unless the innovator makes a specific move to change things. I’m sure one problem was that many shops had 20+ year old terminals and due to the special rules, PBS did not have the incentive to update it.
They should also have added international cards to the merchant agreements by default. I’m not sure if there were regulatory reasons they didn’t do this, but that would have solved some of the problems eventually.
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In what you wrote, I only saw a “problems” and a “major issues” section related to the Dankort. I think that it is rightful to say that the early adaption also had some major advantages. For example, the whole paper-flow around checks almost totally disappeared in the ’90s, which I am sure simplified business processes for many. So I think the Dankort was really a major factor in the whole country ‘going electronic’ very early compared to other countries.
It is a different time now (although most countries still drown in checks, including the US – I so do not understand that part), and no reason for the Dankort in its original format and should just be an option now – it has served its original purpose already.
Very good point Anders.
I agree that Dankort was extremely beneficial, but they should have updated the system at least 10 years or go I think.
We were buying things using our Dankort and pin in supermarkets in the 80s, where that only really became common in the US in the last 10 years and other parts of Europe since the mid 90′s.
Early innovation though tends to cause later stagnation unless the innovator makes a specific move to change things. I’m sure one problem was that many shops had 20+ year old terminals and due to the special rules, PBS did not have the incentive to update it.
They should also have added international cards to the merchant agreements by default. I’m not sure if there were regulatory reasons they didn’t do this, but that would have solved some of the problems eventually.
[...] Post navigation ← Previous [...]