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A new report from the Danish competition regulator shows that Denmark’s Dankort solution is ceding its monopoly in the local payments market.
On September 20, the Danish Competition and Consumer Authority published its Payment Report 2024.
The report shows that the decline in the share of Dankort transactions seen in recent years continued in 2023, with international schemes such as Visa and Mastercard, and Apple Pay, spurring a more diverse set of payment choices.
Dankort is the national debit card of Denmark, but has become increasingly unpopular with consumers, merchants and the wider payments ecosystem.
This is in part because it has been perceived as having a monopoly on the Danish market, and partly because more consumers are making payments overseas, which is not possible with a national card.
Another reason behind Dankort’s declining popularity is that it is owned by Nets, which is in turn owned by Nexi, an Italian company.
“This foreign ownership and lack of innovation compared to Mastercard and Visa frustrates the Danish payments market,” said Ruben Nielsen, vice-president of sales and business development at Shift4, a payment processing company.
“Even though the transactions remain low cost, Dankort’s influence is steadily diminishing. It is cheaper, but declining, and that is quite unique."
Boosting competition
Nielsen went on to say that the report is “groundbreaking”.
“Nets has held a monopoly as the sole acquirer and processor for Dankort, meaning that any dealings must involve Nets,” Nielsen said, adding that Visa and Mastercard have created a more competitive landscape in Denmark.
The report has also been welcomed by Finans Danmark, the country’s trade association for the financial services sector.
“We support an open and competitive payment market where all players have equal opportunities. This fosters increased innovation, benefiting both consumers and Danish businesses,” said Michael Busk-Jepsen, Finans Danmark's director of digitisation.
He pointed out that the report highlights that an average business accepting payments via international cards, such as Visa and Mastercard, could save 40 percent on card acquiring fees by choosing the cheapest acquirer instead of the most expensive.
“At the same time, it notes that the acquirers’ agreements are too opaque for businesses, hindering effective competition in the market.”
“Based on this, Finans Danmark encourages the implementation of initiatives that enhance transparency and strengthen competition in the payment acquiring market," he said.
Transactions down for Dankort
In 2023, Dankort transactions made up just less than half of transactions, compared with almost 70 percent in 2019.
Over this period, the share of transactions with international cards increased.
The decline in the use of Dankort must be seen, among other things, in the light of the increasing use of wallet solutions and the fact that in April 2024 only one bank offered Dankort in Apple Pay. (Although, it is expected that more banks will offer this solution in the future.)
Just less than half of all cards issued in Denmark in 2023 were co-badged cards, meaning cards with several payment solutions, such as Visa/Dankort and Mastercard Dankort.
“Dankort is becoming increasingly irrelevant, which is surprising given that it is significantly cheaper than Visa or Mastercard, with fees of 0.3 or 0.4 percent,” Nielsen pointed out.
He said that the larger card schemes are much more expensive, but despite being half the price, Dankort is not succeeding. “One reason is that it’s not integrated into digital wallets.”
He added that the shift toward Visa and Mastercard should be viewed as a positive, as despite being more expensive, they offer better functionalities and global reach and increased competition helps drive down prices.
“If I'm not satisfied with my current acquirer, I can easily switch to another, which further pressures prices. As a result, Visa and Mastercard prices remain relatively low, with the price difference becoming less significant due to the high level of competition. This is ultimately a good development."
Changing times
Nielsen said that Dankort’s apparent diminishing relevance may be a sign of the times. “Fifteen or so years ago, local payment schemes made sense, as international travel was less common and it was good that countries had more control over their transactions. However, in today’s world, where people live like digital nomads, these local schemes have become less relevant.”
He added that the country’s banks also prefer global schemes such as Visa and Mastercard because they generate significantly more revenue from issuing them.
“These international schemes exert more control over the payment ecosystem, and as consumers, we don't think about these details; we just want to be able to make a payment, regardless of whether it’s through Visa, Mastercard, or a local scheme.”
“There's no clear benefit to using a local scheme, and consumers rarely question co-branded cards. Banks, seeing no incentive to promote local schemes, have phased them out easily,” he said.
When approached by Vixio for comment, Dankort chief Esben Torpe Jørgensen said that it remains the most cost-effective payment option in Denmark and the preferred choice for both merchants and consumers.
“The declining transaction trend we have seen in recent years primarily reflects the growth in the use of Apple Pay, which now represents every third in-store payment in Denmark.”
“We expect that several major banks will enable Dankort in Apple Pay during this year and that this will help gradually reverse the negative trend and maintain Dankort as the absolute best and cheapest payment alternative for both merchants and consumers,” Jørgensen said.
A contrast with Europe’s thinking
One would be forgiven for thinking it strange to hear a European country seeing the growth of Visa and Mastercard as a good thing, considering how so much of what the European Commission and the European Central Bank are doing centres around trying to encourage more homegrown competition.
Nexi is, for example, a shareholder in the European Payments Initiative (EPI), which so many in the EU’s political institutions have been cheerleading and pressuring retail banks in the trading bloc to make a success of.
On September 25, the European Investment Bank announced that it is providing €220m in financing to Nexi Group to support digital payment innovation.
"As with many industries, there is a risk of a few international companies dominating the payment ecosystem,” acknowledged Nielsen. “This represents a downside of the current situation.
“Despite the presence of competition, Visa and Mastercard still capture the majority of transactions, largely because they have become so dominant and control the infrastructure,” he said. “It’s difficult to envision a way to challenge this duopoly effectively.”
However, for now, the major card schemes appear to have been a blessing for the Danish market and seem to be delivering more than Dankort has.
Whether the EPI can eventually bring these sorts of functionalities and benefits to the Danish market in the same way, if it ever gets that far, remains to be seen.
