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Product coverage
Consumer lending; Financial cards and payments
Executive summary
Consumer Spending Mixed as Economy Slows
High interest rates are impacting sales of those big ticket items most
sensitive to rate increases such as cars, boats and houses which all showed
steady decline in demand in 2008. Consumer retail spending data for the same
period was mixed with positive growth seen in durables and a slightly negative
drop-off in consumables. With the current uncertainty in the global market and
a general slowing of the Swedish economy into 2009 it remains to be seen to
what extent purse strings will tighten in the short to medium term.
Swedish Competition Authority Proposes Changes to Banking Regulations
Following a report from Nordic competition authorites the Swedish Competition
Authority, Konkurrensverket, presented a number of new proposals that promote
competition among all Swedish banking players in the domestic market.
Konkurrensverket hopes that these new measures will benefit customers by
fostering stronger competition and in turn better services at cheaper prices
moving forward. The recommendations have been put forward to Swedish
regulators and entail the following; payment systems should have transparent,
non-discriminatory rules and that new, small and foreign enterprises are given
access to payment systems on equal terms. Secondly, clear rules are required
to avoid a conflict of interests between owners of payment systems who are
also a customer of the same system. Thirdly, customers should be given the
opportunity to compare what different banks are offering and that more
information should be provided on the Internet by government agencies and
consumer organisations. Lastly, more effective measures should be put in place
to make it easier for consumers to switch banks.
Debit Card Transactions Soar
Card data for 2008 showed Swedes are using their debit cards at record levels.
The trend follows on the back of impressive 2007 data where transaction
turnover soared towards the SEK500 billion mark. A number of factors help
explain the sudden jump in debit card transactions. Firstly, one of Sweden' s
largest banks Svenska Handelsbanken replaced over 50,000 virtually redundant
ATM cards with its new Frikort debit card product. This move helped boost
total debit card use and subsequent transactions as well as spur the use of
debit cards over cash to pay for items. Also supporting higher debit card use
was a notable increase in the distribution of new POS terminals in retail
outlets.
Contactless Payment Interest Extends to Swedish Retailers
To date, contactless payment card initiatives have largely been associated
with the Swedish public transport system. The benefit for transport operators
is primarily payment transaction efficiency as large volumes of customers can
be processed easily and quickly. The same benefits apply to large, high-volume
Swedish retailers. In a survey commissioned by Visa Europe and conducted by
the Centre for Retail Research, 300 large and medium-sized businesses were
interviewed about their future plans for electronic payment systems. The
survey revealed that 53% of Swedish retailers are expected to deploy
electronic kiosks or PDA-type devices for reading contactless cards.
Cash Use Still Too High According to Central Bank
Sweden' s Central Bank, Riksbanken, has undertaken an analytical study into the
cost of cash versus cost of payment card when purchasing. The study is part of
the Central Bank' s long-term goal of improving automation and efficiency in
the Swedish payment system. The analysis calculated total costs to society
associated with either payment instrument and found anything above SEK70 best
suited payment by card while below this figure, including micro-payments, cash
was the better option. When this threshold of SEK70 is matched against current
average cash spend, the results indicate that Swedes are using cash for
purchases too high in value where it would be more cost effective using a
payment card. This trend reflects the fact that Sweden historically has a
higher rate of cash use than its Nordic neighbours partly because of fees
being applied at POS terminals but not when withdrawing cash at ATMs. To
encourage better payment system efficiency the Central Bank argues that fees
should be applied where actual costs are incurred.
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