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The status of Instant Bank Payments in Europe

What’s the status of Instant Bank Payments in Europe today?

There’s no quick answer to that question. But by understanding today’s most mature markets, you can prepare your payment strategy for the future and gain an edge over the competition.

Key takeaways

  • Sweden, Finland, and the Netherlands have mature Open Banking Payment landscapes

  • Offering an Instant Bank Payment option in those markets is essential for merchants

  • Today’s local payment schemes make integration complicated and fragmented

  • Working with a multinational vendor supports a forward-looking payment strategy

  • Established fintech payment vendors face competition from innovative challengers

The online payment landscape in Europe today is fragmented and will continue to change rapidly in the coming years. But there are a few mature, technologically advanced markets where your business can get a sneak peek of the future.

Meet local payment preferences today and prepare for the future

Sweden, Finland, and the Netherlands are three countries where vendors can increase market share and customer satisfaction today by offering an Instant Bank Payment option.

Meeting local payment preferences in these markets can make a big difference in terms of acquisition, conversion, and customer lifetime value.

If you test the waters in these leading-edge nations, you can use your learnings to build a payment strategy for the long term.

What are Instant Bank Payments?

Juniper Research defines instant payments as any payment scheme outside the card networks where the funds are capable of being received in 10 seconds or under, and confirmation of the payment to the parties is available in one minute maximum.

Instant Bank Payments are referred to by a number of names, including Account-to-Account (A2A) Bank Transfers, Open Banking Payments, Online Banking Payments, and Online Banking ePayments (OBeP).

At Brite, we use the term Instant Bank Payments because we do exactly what it says on the label.

Domestic instant payment platforms only work domestically

In each of these markets, banks already have access to advanced domestic payment rails.

This means the underlying technology that supports Instant Bank Payments is already available, in contrast to other European markets where local instant payment rails and PSD2 APIs are still in various stages of development.

Each of these three leading markets has popular domestic instant mobile payment apps, those being Swish in Sweden, MobilePay in Finland (which is also the standard in Denmark), and iDEAL in the Netherlands.

For merchants offering these preferred local payment methods means your company must integrate each one individually. This is an era of multinational merchants and increased cross-border transactions. So, relying solely on domestic schemes can become burdensome.

Multinational Instant Bank Payment rivals will eventually replace domestic schemes

As good as they may be, the fragmented local payment schemes in relatively small European markets may not be able to hold out against vendors with a broader multinational offering.

By choosing a multinational Instant Bank Payment vendor, you can simplify integration across all your markets. As online commerce borders continue to blur in the eurozone, a multi-market approach will help you streamline your payments strategy.

Factors driving the growth of Instant Bank Payments in Europe

A combination of changes in consumer demand, increased regulation, shifting market forces and technological standardization are all pushing fintech to the next level of maturity.

Though credit and debit card payments, traditional bank transfers, invoices, digital wallets, and Buy Now Pay Later (BNPL) options are all popular across the eurozone, in Sweden, Finland, and the Netherlands, Instant Bank Payments are a “must have'' payment option.

In these markets, people have seen the light — and there’s no turning back. By understanding the consumer trends in these countries, your business can prepare for a future where customers across Europe will demand an Instant Bank Payment option.

Why should your business offer Instant Bank Payments?

  • Drive growth with consumer convenience

While paying with Instant Bank Payments consumers only need top of mind information, no card details or registration is needed.

  • Increase acquisition and conversion

Consumers are more likely to choose merchants who offer their preferred payment method and less likely to abandon transactions.

  • Simplify multinational expansion

With easy self-integration or integration via PSPs, you can offer a consistent and reliable payment solution in all your markets.

  • Stay SCA compliant

Most EU banks now (or soon will) support seamless biometric 2FA, meaning you stay compliant while reducing fraud and risk of chargebacks.

  • Speed up fulfilment

Knowing the customer funds have already settled in the account allows you to ship goods and process transactions faster.

  • Increase cash flow

With no holdbacks, funds usually settle instantly with low risk of chargebacks, allowing you to increase your liquidity.

  • Accelerate refunds, withdrawals, and disbursement payouts

Instant payouts lead to increased customer satisfaction, spending power, and lifetime value.

  • Minimise customer service burdens

Auto-populated data reduces human error and speeds up delivery leading to reduced customer service demands

  • Reduce Processing Fees

You can improve your margins by rising card processing fees in Europe

Instant Banking Payments in Sweden

Merchants need to offer a broad range of payment options in order to satisfy the diverse preferences of the Swedish population.

However, what is generally clear is that, while cards still hold a significant share, BNPL and Online Bank Transfers are taking the lead in the largest Nordic marketplace – but the race is a close one.

An amendment to the Swedish Payment Services Act enacted in July of 2020 will most likely have a serious effect on that contest. In order to combat growing consumer debt, the Swedish government has ruled that payment service providers (PSPs) may not position credit as the top option in the checkout. Non-credit options must be presented first and credit cannot be “pre-selected”.

That ruling obviously tips the odds in favor of Instant Bank Payments. While the local Swish platform is indeed popular in Sweden, working with a multinational vendor will make it easier for merchants to integrate Instant Bank Payments in Sweden and across other markets.

Currency: Swedish Krona

2020 EU DESI* rank: 2/28

Population 2020: 10.38 million

Online shoppers 2020: 7.5 million

Preferred online payment methods 2020

Instant Banking Payments in Finland In general, the Finnish people predominantly prefer paying with Online Bank Transfers.

While BNPL has seen a significant uptick with Finnish shoppers in recent years, digital wallets and card payments are still more popular. However, the EU’s rules for Strong Customer Authentication (SCA), enacted at the start of 2020, add potentially damaging friction to online card payments.

Research from J.P. Morgan shows that Finns prefer shopping on their mobile devices’ browser compared to apps or desktop browsers. To complete an online card purchase, Finnish shoppers now must enter their card details and then be redirected to perform SCA-complaint 2FA.

In contrast, when an Instant Bank Payment is made on a mobile device, 2FA can be performed seamlessly using Finland’s widely adopted digital Bank ID app. That digital-first experience is likely to take more market share away from cards in favor of Instant Bank Payments.

When it comes to e-wallets, established users get many of the same benefits as they would with Instant Bank Payments. However, with Instant Bank Payments, there’s typically no sign-up or app download required, as there is with e-wallets.

As new consumers enter the market, there’s not much advantage for them to sign up for an e-wallet. So, they will most likely choose the easier, faster route of Instant Bank Payments.

Currency: Euro

2020 EU DESI* rank: 1/28

Population 2020: 5.53 million

Online shoppers 2020: 4.1 million

Preferred online payment methods 2020

Instant Banking Payments in the Netherlands

Similar to the Swedes and Finns, the Dutch people have an affinity for technological innovation and an aversion to taking on debt.

But in contrast to the diverse payment landscape in the Nordics, Bank Transfers are by far the preferred payment method for online transactions in the Netherlands.

Online shoppers in this small and sophisticated nation expect quick delivery. Instant Bank Payments allow online retailers to process and fulfill orders faster and deliver on demanding customer expectations.

Currency: Euro

2020 EU DESI* rank: 4/28

Population 2020: 17.3 million

Online shoppers 2020: 13.1 million

Preferred online payment methods 2020

The fintech giants of today might not be the leaders of tomorrow

In addition to the strong local bank transfer schemes, many of the leading first-generation fintech payment and service providers have strong roots in Northern Europe. Those pioneers have claimed market share in their homelands and continue to expand rapidly into new markets.

Similar to the first-wave leaders in online business of the 90’s, today’s fintech titans face challenges from a new generation of agile and innovative players. That means you can’t necessarily depend on today’s leader to be tomorrow’s payment option of choice.

Merchants who want to stay “future-proof” should consider offering a diverse range of payment options. If you want to dive into the technical details or learn more about how you can realize the benefits of Instant Bank Payments with Brite, please get in touch.

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