Swish, the secret Swedish FinTech payment company created by Nordic banks and used by 50% of Swedes is challenging Swedish unicorns

“Just Swish it to me. It is easier and safer than having cash.” That’s what a Swedish friend told me after having dinner when I recently visited Stockholm. When I told him that I did not know what Swish was he was shocked. “Everyone uses Swish nowadays. No one uses cash anymore. Swish is a free and instant mobile app payment. You should check it out.”

Back in London, a quick googling revealed that the app was indeed the most popular Fintech app in Sweden with 52% of the Swedish population using it in 2015 and recently reached 5m users. What is this app about? Why is it so popular? Why don’t we have it outside of Sweden?

52% of the Swedish population used Swish in 2015

Source: Sveriges Riksbank

What is Swish? A C2C peer-to-peer money transfer app created by Nordic Financial Institutions

Swish enables private individuals to quickly, simply and securely send money to other users in real time by connecting mobile phone numbers to bank accounts.

Key facts

• The app has 5m of users or equivalent to 50%+ of the Swedish population
• $890m has been exchanged through the mobile cash-transfer app since the company's inception in 2012. [source]
• A transfer is instant and free of charge.
• To use the service, one needs a smartphone, the safety solution mobile Bank ID, a Swedish bank account and the Swish app.
• A user only needs someone else phone number to transfer money.
• Only works in SEK.
• Users can temporarily increase the amount to SEK 150,000 ($16,485) for a limited amount of time. The average maximum amount restricted by banks is about SEK 20,000 ($2,200). [source]
• Has never raised VC funding and was created by a consortium of Nordic financial institutions: SEB, Danske Bank, Handelsbanken, Länsförsäkringar Bank, Nordea, Swedbank and Sparbankerna.

Why is it interesting?

• “Has never raised VC funding and was created by a consortium of Nordic financial institutions”: This is probably one of the most interesting feature. It may be the only example in Fintech of a successful consumer product built by a consortium of financial institutions without having a VC-backed third party coordinating the relationship. The insane user growth reaching in less than four years 5m of users (See above graph) or equivalent to 50%+ of the Swedish population is astonishing.
• Safe, Free, Instant and mobile first: Mobile payment is nothing new. Companies like Paypal, Venmo, Square cash, Facebook Messenger, SnapCash or Leetchi (Owned by Crédit Mutuel Arkéa) let you send money to your family and friends via your mobile. However, none of them offer a smoother product than Swish. Some have transaction fees if used with a credit card such as Vemno, some have security concerns, most of them do not offer instant transfer (Square Cash) and some do not have an intuitive mobile app. Swish has been able to offer a simple and well executed product to its users. As long as you trust BankID (the banking payment infrastructure) you are good to go.
• Compete with cash & debit card: With an average transfer limit of c. $2,200 Swish is a perfect replacement of cash. No one seems to miss having to withdraw cash or to carry bills and coins (Who does not have a jar full of coins and always think they will go one day to the coin machine to exchange it but never does?).
• Privacy issue?: Today, Swedish banks have more Swish transactions than A.T.M. withdrawals. Swedish banks have now more and more data on their users transaction habits. Some may argue that this may lead to privacy issues. Do you want that your bank knows every transactions that you have done? I guess not.
• In a recent Wired article, Björn Ulvaeus (Former ABBA) shared his view on why a cashless society will help to fight criminals: “ Take it away and thieves have no foolproof way to sell their stolen goods, drug dealers no way to hide their deals, and eventually the whole shadow economy collapses.” However, one may argue that thugs may switch to Bitcoin or other crypto currencies for their trades.

Swish has been moving into the B2C market, challenging Swedish unicorns like Klarna, Izettle.

At its inception, Swish was primarily used for transfers between two persons who wanted to split the bill or for paying back debt in everyday life. Quite quickly, small businesses started using the app as it was convenient to use and free of charge.

In July 2014, Swish expanded its coverage to businesses. For companies, the app costs between 1.5 and 2 SEK ($0.16–0.22) per transaction and is a direct competitor to iZettle. Compared to Swish, retailers with iZettle need to have a small card reader in order to accept payments, while this isn’t necessary for Swish. Moreover, iZettle has transaction costs unlike Swish.

At first Klarna was a partner with a partnership announced in October 2015. But the partnership terminated in June 2016, when Klarna entered the offline transaction market with its Checkout solution.

After conquering the Consumer to Consumer transaction market, Swish has now been working to expand to eCommerce. After a launch in January 2016, the Company had to pause its eCommerce solution due to technical difficulty with BankGirot/BankID. After working for 8+ months on it, Swish is expected to relaunch its eCommerce app in January ’17. This will be a very exciting next step for the company.

Next step: International domination?

My first thought after learning more about Swish was when can I use it in the UK or in France?

Swish’s internationalisation is very complicated for a few reasons. Swish was built within a single country with a unified and trusted payment infrastructure (BankID) and a single currency (SEK). Moreover, cash has seen its usage decrease over the years in Sweden. In addition, Swedish financial institutions had experience working together though not a this scale of success. All these elements helped the success of Swish including others such as the very high mobile penetration. However, even with these elements, the IT infrastructure was not ready to move from C2C to B2C. After a 8+ months of revamp the platform will be relaunched in January ‘17.

Besides the IT challenge, the coordination with other banks and timing of having a cross-border intra-banks solution is very challenging. As Niklas Arvidsson, a researcher in industrial economics and management at KTH said: “Swish is a brilliant idea, but to introduce it internationally is a challenge, not least because it takes a long time to change other countries’ banking systems from scratch. But it is not impossible that a Swish-based banking revolution can also occur abroad.”

Swish competitors start to emerge. For instance, in March 2016 clearXchange was launched in the US, a bank-backed service that lets people transfer money from their bank account directly into someone else’s. Unlike Swish, payments are not instant and take usually 24h and only work with participating banks. This is a great initiative though a company like Vemno, who enjoys a very strong market share in the US, may be a strong competitor. As well as other factors the high level of cash usage in the US, representing 50%+ of all transactions, may impede the switch to clearXchange.

Next time I go to Stockholm, no more SEK only Swish.

Etienne

ps: do not hesitate to contact me if I miss anything :)