J.P. Morgan Country Insights

THE CHANGING DYNAMIC OF PAYMENTS IN EUROPE

Denmark

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Introduction

The Danish economy is performing well, even if growth is set to soften slightly in 2018 and 2019, with GDP forecast to rise by 2.0% and 1.9% respectively.1 However, private consumption is expected to remain strong growing by 2.5% in 2018, driven by steady employment and continuing rises in disposable income.2 As labour shortages continue in certain sectors of the economy, wages are expected to rise, again potentially impacting consumption, although this may also have an inflationary impact.3

This information is based on projected figures and is subject to change at any time

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Source: World Bank, CIA (2016), Global Data, Internet Live Stats 2016 , International Monetary Fund (GDP)

Denmark: At a glance

Population 5.73m

Average age 42 years

GDP €265.3bn

B2C eCommerce market value €13.57bn

Internet penetration 96%

Smartphone penetration 68%

Card penetration per capita 1.83(debit & credit)

A small but strong market for ecommerceWith just 5.7 million inhabitants, Denmark makes up only a small part of the total population of the EU. Yet the country is regarded as one of the most progressive states in the world, a reputation that is reflected by its enthusiastic uptake of digital technology.

Benefiting from a strong internet infrastructure and a regulatory regime that has encouraged access to fibre networks, Denmark has one of the highest broadband penetration rates globally, at 96.3% in 2016.4 With almost universal access to the internet, online shopping has come to represent 9.9% of total Danish retail. The European average is 8%.5

In fact, Denmark is catching up with the UK, the European leader, where ecommerce accounted for 16.8% of total retail sales in 2016.6

Such growth is set to continue, driven by increasing amounts of shopping carried out on smartphones as well as new alternative payment systems entering the country. As a result, Denmark is forecast to have a B2C market value of €21.12bn in 2020, with a projected compound annual growth rate (CAGR) of 11.7% between 2016 and 2020.7

A smartphone-happy nationDenmark’s ecommerce growth story is underpinned by a population of high-spending, regular shoppers. Two-thirds of the country shop online each month, and one in three Danish consumers makes cross-border purchases,8 making Denmark a clear target for both international and domestic retailers. While Denmark is dwarfed in terms of retail sales volumes by Europe’s ecommerce big-hitters, such as the UK and Germany, Danes spend far more online than the European average. The average annual online per capita spend in Denmark in 2015 was €3,111, €644 more than Norway (€2,467) and almost three times the lowest spenders in our study, Spain (€1,089 per annum).9

Denmark: Consumer spending

Source: Trading Economics, Statistics Denmark

DEK

Mill

ions

Jan 2015

July 2015

Jan 2016

July 2016

Jan 2017

July 2017

Jan 2018

228000

226000

224000

222000

220000

218000

216000

214000

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Perhaps unsurprisingly for a wealthy nation which prioritises investment in technology, Denmark is devoted to its smartphones. At 68% in 2016, this tech-loving country is estimated to have one of the highest smartphone penetration rates in Europe.10 However, mcommerce is still relatively underdeveloped, accounting for only 19%11 of the ecommerce market, against a European average of 36.4%.12 This is changing and smartphones are gaining ground as a tool for accessing information and making payments, and 40% of Danes now consider it important that an online store be customised to suit mobile phones.13

The Danish advertising industry is also supporting this shift towards smartphone-based shopping. As smartphone use increases, marketing departments are spending more in this area. Mobile phone advertising now makes up 61.2% of Danish digital ad spending in total, as Denmark’s consumers move away from their desktops and on to their phones to make purchases.14

Moving to a cashless economyWhen paying online, the Danes prefer to use cards, with 44% of transactions by value carried out using credit or debit cards.15 The dominance of cards may be explained by the population’s use of banks. Denmark had a 100% banked adult population in 2016, in contrast to the EU average of 93.73%.16 This also explains why bank transfers are popular, accounting for 22% of payments. E-wallets represented 12% of the market, while cash was least popular, at 8%.17

Card payments generated €6.01bn of sales in 2016, up 31.7% on 2014’s €4.56bn figure.18 The country has the highest frequency of card use in the world, with 210 transactions per card in 2017.19 In fact, card use is encouraged by the State – a statutory provision was created in 2016 that means all Danish consumers must be able to pay via card, including online.20 Dankort – the national debit card in Denmark – is the leading single alternative payment method. Launched in the 1980’s by Danish banks, Dankort was the first shared national electronic debit card system in the world. Around 80% of Danes now own a Dankort card,21 which can also be used internationally via Visa®.

Payment method split by value (%)

Bank Transfer

22%

Card

44%

Other

14%

E Wallet

12%

Cash

8%

Source: J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData and EHI-Studie (2016)

12%Consumer Electronics

eCommerce: % of total sales by segment

eCommerce penetration (%)Source: J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company, via via eMarketer & E-commerce Europe, 2016

4%Mass Merchandise

55%Accommodation/ Hotels

19%Fashion/ Apparel

3%Grocery/ Supermarkets

100%Digital Goods

97%Airlines

4%Department Stores

58%Online travel agents (OTAs)/ Tour Operators

38%Public Transit (metro/rail/bus)

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Cash use declined from €1.19bn of sales in 2014 to €1.11bn in 2016,22 reflecting Denmark’s determination to become a cash-free society – the country shut down its last mint in December 2016.23 The declining use of cash also helped e-wallet sales to grow by 17.2% in value between 2014 and 2016, to €1.63bn.24 In the near future, e-wallet growth may make additional gains after Apple Pay launched in Denmark in October 2017.

Buy-now-pay-later bill payment company Klarna has a significant foothold in the Danish market, with a 5-10% share of the alternative payment market. PayPal holds 10-12% of the alternative payment market, while domestic smartphone payment app MobilePay, launched by Danske Bank in 2013, now accounts for 7-9% of the market.25

This growth in alternative payments has enjoyed high support from domestic banks. In February 2017 a group of 62 Danish banks, called

Bokis, launched an e-wallet that supports payments made by Mastercard©, Visa© and Dankort debit and credit cards.26

Low fraud, fast paymentsAlongside its Nordic neighbour Sweden, Denmark has one of the lowest rates of ecommerce fraud among the countries included in this analysis.27 Denmark’s low cash use and high levels of cards with payment protections have helped create this low-fraud environment.

With a rapidly growing alternative payments industry, a speedy online payment infrastructure and a highly banked population willing to spend more than the European average online, Denmark is a small but powerful ecommerce player.

Card penetration per capita

Metric indicator Total

Credit card per capita (ecommerce enabled)

Debit card per capita (ecommerce enabled)

Total cards per capita (ecommerce enabled)

1.51

0.32

1.83Source: J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData and Lafferty, 2016

DEBIT

CREDIT

TOTAL

Penetration of alternative payment methods (%)

28-31%Dankort

10-12%5-10%PayPalKlarna

Source: J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company

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References[1] European Commission, ‘Autumn 2017 Economic Forecast – Denmark.’ Accessed January 2018. [2] European Commission, ‘Autumn 2017 Economic Forecast – Denmark.’ Accessed January 2018. [3] OECD, ‘Denmark - Economic forecast summary (November 2017).’ Accessed January 2018. [4] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Internet Live Stats, 2016. [5] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2016. [6] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2016. [7] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData, 2016. [8] Postnord, 2017. ‘E-Commerce in the Nordics 2017.’ Accessed January 2018. [9] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via E-commerce Foundation, Global B2C E-commerce Report 2016, 2016 [10] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData, 2016. [11] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Statista, 2016. [12] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company Source: FDIH (2016), E-Commerce Foundation (2015, 2016), Statista (2016), GlobalData (2016). [13] Postnord, 2017. ‘eCommerce in the Nordics 2017.’ [14] eMarketer, September 2017. ‘Mobile Nearing Two Thirds of Digital Ad Spend in Nordics’. Accessed January 2018. [15] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData, 2016. [16] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData, 2016. [17] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via GlobalData, 2016. [18] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via Timetric, 2014 and via FDIH, 2016 [19] GlobalData, 2017. ‘Payments Landscape in Denmark: Opportunities and Risks to 2021’. Accessed January 2018. [20] GlobalData, 2017. ‘Payments Landscape in Denmark: Opportunities and Risks to 2021’. Accessed January 2018. [21] AboutPayments.com, 2018. ‘Denmark E-Commerce Market Profile.’ Accessed January 2018. [22] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via FDIH (2016) Timetric (2014), GlobalData (2015-2016), FDIH (2016). [23] Bloomberg, December 2016, ‘Scandinavia's Disappearing Cash Act.’ Accessed March 2018. [24] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company via FDIH (2016) Timetric (2014), GlobalData (2015-2016), FDIH (2016). [25] J.P. Morgan Country Insights: The Changing Dynamic of Payments in Europe: Data has been provided to J.P. Morgan Merchant Services by Edgar, Dunn and Company. [26] GlobalData. ‘Payments Landscape in Denmark: Opportunities and Risks to 2021’ (2017). Accessed March 2018. [27] Kount, 2018. ‘Propriety research Q1, 2018.’

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* J.P. Morgan's The Changing Dynamics of Alternative Payments in Europe study includes the following countries: UK, the Netherlands, Germany, France, Italy, Spain, Norway, Denmark, Sweden, Switzerland, Finland.

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