Mobile Payment Apps in Europe — Part 1: MobilPay, Swish and VIPPS

A wave of Mobile Wallets/Payment methods took over Europe in 2012– up to now (2019). Trying to think over and structure this phenomenon, we can break down the wallet solutions into groups according to:

• underlying technology they use (bank transfer-based, card-based)
• ownership parent (owned/started by individual founders, banks, telecom, technology players)
• by services they provide (P2P, C2B payments at POS, e-Commerce, ATM)

However, with further development of the wallets, very frequently technologies, services and ownership structures mix up. Therefore, I believe the best split is: Successful scaled-ups, Uncertain scale-ups and Scale-up Failures. It is interesting to look into success factors and headwinds that influenced players in each of these groups.

The first part of the analysis explores 3 Nordic national champions: Mobilepay, Swish, and VIPPS.

Mobilepay

One of the first successful scale-up stories, started by Danske Bank in 2013 and currently run by a consortium of banks. It was a first successful P2P wallet scale-up in Europe, quickly followed by a successful scale-up in e-Commerce and even POS environment (contrary to Swish). Mobilpay moved quickly and aggressively into POS and e-Comm acceptance in 1 year after P2P app launch. e-Commerce solution worked as a simple bank transfer-based pay button. POS installation called Mobilepay Box included printed QR code and Bluetooth beacons which allows customers to pay with MobilPay wallets at physical shops. Mobilepay was able to equip around 100k Danish merchants with this small MobilePay POS acceptance circumvents cards — biggest alternative (non-card) POS acceptance network in Europe.

Reach: 4M users (70% of Danish population), 100k merchants in 2019.

Key success factors:

1. Being first on the market (competitor Swipp that was launched a few months later was not able to scale up, as “winner takes it all” in the wallet game)
2. Successful partnership with other banks, opening the doors for other banks customers to register and for other banks to participate in the wallet development
3. Quick and timely movement into e-Commerce and POS (1 year after P2P launch)
4. High smartphone penetration and low reliance on cash in Denmark, which encouraged customer adoption
5. Relatively high card acceptance fees and POS terminal prices in Denmark, which encouraged merchant adoption — as MobilePay is charging merchants much smaller fee compared to cards (0.04–0.10 EUR per transaction vs 1–2% of volume)
6. Variety of strong use-case/product offerings: cashless phone-to-phone acceptance, subscriptions, invoicing for companies, in-app e-Commerce integration, expense sharing app (integrated with MobilePay)

Challenges (ahead) and Potential:

1. Denmark is a small country and national penetration ceiling is reached
2. Scale-up to neighboring countries (Norway, Sweden, Finland) proved difficult, as domestic champions already took the ground there
3. Monetizing the solution is extremely difficult, even after such an impressive scale-up. Fees are low enough for scale-up, not high enough to make profit. Increasing fees may potentially damage relationships with merchants
4. Volume shift from cards to Mobilepay is still slow to happen. High user penetration does not necessarily imply high usage.
5. Mobilepay customer payment experience is lagging behind this of cards in certain aspects: clunky POS payment process requiring opening the app and then scanning the code/connecting via Bluetooth and final confirmation, longer e-Commerce checkout compared to card-on-file.
6. Threat from Apple/Android Pay which basically has a similar value proposition but with a better interface and more frictionless customer experience

2. Swish

Swish is actually an older Swedish brother of Mobilepay, as it was launched a couple of months before. It is almost a twin of Mobilpay: runs on bank transfer rails, started with P2P, owned by a consortium of bank, uses national Bank ID for authentication. It basically mimics Mobilepay’s P2P scale-up success but when it comes to moving into acceptance Swish story is different. While it took around 1 year for Mobilepay to move into e-Commerce, for Swish it took long 4 years. Moreover, when the solution was launched in 2016, the technical side of solution appeared not to be ready for the popularity the Swish had got — number of transactions was too high for backend payment infrastructure to handle them and e-Commerce product got shut down until being relaunched in 2017. When it comes to POS pilots, then only started in 2019 (compared to 2014 for Mobilpay) and

Reach: 6.7M users, 160k companies in 2019.

Key success factors:

Similar to Mobilpay: first mover, bank partnership, cashless society, high penetration of smartphones, high card rates and POS terminal prices

Challenges (ahead) and Potential:

1. Late move from P2P into revenue-generating areas (POS and e-Commerce acceptance) poses questions over the feasibility of conquering those areas at all, especially now, after Apple/Android Pays already arrived in Sweden
2. Swish generally doesn’t offer any other user propositions apart from the basic ones (P2P, e-Com, QR at POS acceptance).
3. Potentially Swish can move into recurring, or try to expand abroad in e-Commerce as an alternative payment method, but given the speed the solution was developing so far and the amount of time already wasted, this is unlikely
4. The key monetization and development areas for Swish lie in e-Commerce acceptance (displacing cards) as well as in recurring, in-app and Grab-Go use cases, which are still developing and remain underserved.

3. VIPPS

VIPPS is the youngest among the three — launched in 2015 by DNB (biggest Norwegian bank) and currently owned by a consortium of >100 Norwegian banks (while DNB still holds 52% of shares). VIPPS expansion from P2P into acceptance was not that aggressive as one of Mobilepay and not that slow and cumbersome as of Swish. Instead, VIPPS played smart and well-weighted tactics of point attacks, with good use of strategic partners. It used diplomatic negotiations to shut down some rival wallets (mCash, Mobilepay) and get into a strategic partnership with others (Alipay). It targeted specific innovative use-cases in POS and in e-Commerce instead of trying to reinvent the wheel and build the acceptance network from scratch.

Reach: 3.2M users (65% of Norwegian population), 30k business

Key success factors:

1. Scale-up unchallenged by competitors. DNB negotiated shut down of rival wallet from Spareabank with a transfer of users to VIPPS. Later, when MobilePay tried entering Norway, DNB managed to persuade Danske to back up, offering share in VIPPS in return.
2. Strategic partnerships outside Norway. In 2019 VIPPS partnered with Alipay and 5 other European wallets (Blucode, Pivo, ePassi, momo pocket, Pagaqui) in 2019 with an aspiration towards a European wallet alliance, which means VIPPS users are able to pay with their wallet abroad using QR-codes, based on the Alipay QR-code format.
3. e-Commerce partnerships with Nordic PSPs (DIBS, Nets, Valitor, Bambora, PayEx) towards fast e-Commerce acceptance scale-up in the Nordics
4. Phone-to-phone QR-based payments targeting specific use cases underserved by card acceptance providers like flea markets and handymen
5. Targeting NFC POS acceptance instead of Bluetooth. NFC technology doesn’t require additional hardware at acceptance points, is more reliable and offers better user experience compared to Bluetooth technology. On the downside, NFC user base is limited to Android phones only.
6. VIPPS GO solution targeting Grab-and-Go use case is among the first ones in Europe. Grab-and-Go or in-store mobile ordering stands for the situation when a customer orders and pays on mobile while being in and purchasing from a physical shop/cafe/bar (with Amazon Go being a global pioneer). The segment is in an early development stage and is a perfect technological fit for VIPPS-like mobile wallets. It is much more efficient to create value in an underserved emerging area then try to fight your way though established and more capital-intensive acceptance value chain (like Mobilpay Box)

Challenges (ahead) and Potential:

1. Nordea, Danske and smaller banks brought Apple Pay in Norway. DIBS opposition to Apple Pay coming from a natural move to support VIPPS may backfire if Apple Pay gains popularity in Norway (especially given the relatively high iOS penetration rate of 49%)
2. e-Commerce penetration among traditional online retailers (medium and large-sized) remains low, which basically cuts VIPPS out of the main potential monetization area. VIPPS doesn’t seem to win e-Commerce game unless more effort is put into. e-Commerce expansion should be seen as key attack area for VIPPS in light of both scale-up and monetization aspirations
3. Cross-border QR-code acceptance has limited potential given that it targets same Norwegian users traveling abroad(and national customer base is very limited). Economics of wallet partnership for VIPPS is also unclear and uncertain
4. VIPPS GO (Grab-and-Go) is a promising use-case with significant value-added potential. However, the emergence of Global or pan-European player in this may provide a threat to VIPPS in this area.
5. VIPPS should explore additional niche value-adding use-cases auxiliary to main value proposition (such as recurring, invoicing, digital credit, expense sharing and moneypots, etc.)

Next part of this analysis is going to talk about other (non-Nordic) relatively successful scale-up wallets: BLIK, Twint, Payconiq, Tikkie.