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Northern Europe shows that contactless only succeeds with buy-in from all key stakeholders

Contactless cards have become popular in some European countries like Poland (78% of all payment cards were contactless at the end of Q3 2016) and the UK (61% of cards at the end of Q1 2017). Over the next few years, other European markets are expected to follow suit. In Northern Europe, the development of the contactless market has varied depending both on how early contactless rollout began and on the level of engagement from banks, card schemes, and retailers.

Markets that started issuing contactless cards earlier naturally have higher levels of contactless card penetration. Finland, the most developed market in terms of the percentage of cards in the market with contactless functionality, was also the first market in the region to roll out contactless cards, starting in 2012. By contrast, Estonia, Latvia, and Lithuania, which are the weakest markets by contactless card penetration, began rollout in 2016.

However, the success of contactless technology within a market is not solely measured by the number of cards in the market. While Finland is the strongest market in the region by contactless card penetration (and overall number of contactless cards in issue), issuing started in 2012 and therefore the rollout has happened over the course of five years. The Bank of Finland revealed that there has been slow uptake of this facility up until now. In Denmark, contactless card issuing began in 2015 but did not pick up momentum until 2016, when national scheme Dankort launched a card-reissuing campaign, supported by the large banks and retailers in the market. As a result of this concerted effort by the industry, the number of contactless cards in issue and the number of contactless transactions increased rapidly from 2015–16, with the number of Dankort contactless cards growing from less than 15% to 64% and the number of transactions growing from 1.9 million to 85.4 million (less than 5% of total card transactions in 2016).

Both Denmark and Norway have dominant national schemes in place – Dankort in Denmark and BankAxept in Norway. In 2016, less than 20% of cards in Norway had contactless functionality and very few POS terminals were enabled due to BankAxept’s (and the Norwegian banks’) relative lack of support for the technology. However, 2017 is very likely to see a boost to the contactless market due to a deal between BankAxept and Canada’s Interac in 2016 to develop a contactless proximity payment solution in Norway.

Banks play an important role in creating a strong contactless card market, but retailer buy-in is necessary too in order to expand the acceptance infrastructure and increase consumer awareness of contactless cards. In 2015, ICA Banken (a mid-sized bank owned by a major supermarket chain in Sweden) started issuing contactless cards and at the same time activated its POS terminals in ICA stores for the new payment feature. This end-to-end strategy proved successful, resulting in around 7 million contactless transactions in less than a year with only 400,000 customers having contactless cards. A number of other banks and retailers in Sweden are also involved in contactless card projects.

The uptake of contactless cards in Northern European markets will depend on whether banks, retailers, and schemes join forces to support mass rollout. With both contactless cards and terminals in place to drive usage, it then becomes critical to educate consumers about the benefits of the technology.

By Madalina Aghinita, Consumer Payments Analyst

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