Payments Report 2021

Pandemic hastening development towards digital payments

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New actors offer easy means of payment

Published: 3 November 2021

In Sweden, several fintech companies have made it easier to shop online. For instance, Klarna offers solutions where one can pay via one's online bank or via an invoice when purchasing online. For those wanting to pay by card, it is often possible to register their card details with the retailer or a payment services provider, enabling purchases to be made at the touch of a button. There are also new companies offering rapid and simple cross-border payments, for instance, through digital wallets, where one can save, send and receive money on one’s mobile phone.

In some parts of the world, large IT companies, known as bigtech, have a substantial influence on the payment market. This type of company can exploit their large, well-established networks of customers, often on social media platforms, which gives them a competitive edge on the payment market. In China, for instance, two domestic bigtech companies, Alibaba and Tencent, already hold 94 per cent of the market for payments using mobile phones.

Bigtech companies in our part of the world, such as Apple and Google, offer payment solutions like Apple Pay and Google Pay, which are connected to the customer’s usual payment card. These payment solutions make it possible to pay, for instance with a contactless payment using a mobile phone or a smart watch in a supermarket. Payment solutions where bigtech companies enable payments within an existing large digital network can grow very rapidly. The fact that Facebook, together with a group of companies is working on launching a digital currency called Diem has therefore attracted considerable attention in the media and among authorities and actors in the payment market.

The development by which bigtech companies become actors in the payment market has led to international discussions on the need for new regulation. Regulation should ensure consumer protection and confidence in the new digital services, but at the same time ought not to create unnecessary obstacles for innovative solutions and new actors. As the companies often have a large global range, international cooperation on regulation will be important. There is also concern among central banks that private companies with a global range can quickly enter the national payment market with payment solutions based on another country’s currency and compete with the national currency.