Home Consumer debt Has Sweden just defined the next big trend in e-commerce payments?

Has Sweden just defined the next big trend in e-commerce payments?


Designed to increase consumer protection for online shopping and curb the growing indebtedness of Swedish households (currently increasing at a rate of 7% per year), the Swedish Parliament approved an amendment to the Swedish Payment Services Act (2010: 751).

Effective July 1, 2020, the new provision requires PSPs to ensure that their online merchants operating in Sweden prioritize debit payment options over credit payment options at checkout. Accordingly, the online merchant’s payment page must:

1) Present the debit payment options to the customer first, when available

2) Make sure the credit options are not preselected

These measures aim to ensure that consumers do not automatically use credit payment options without also considering debit options; the customer must now actively choose to use a credit payment option. By law, debit options include bank transfers and debit cards. Credit options are credit cards, bills, and installment or subsequent payment methods. Interestingly, for payment cards that support both debit and credit, the debit and credit options should either be separated or treated together as a single credit-based payment method. .

It is important to note that Swedish consumers have welcomed this announcement. Recent Trustly Research, the popular Swedish payment method, revealed that 70% of shoppers are in favor of the new checkout legislation. Coupled with another finding that 60% of Swedes prefer to pay for their purchases immediately with existing funds, it’s pretty clear that Swedish consumers want more control over their finances and overall payment experience.

Could this be the next big thing in online payment?

As many economies around the world turn to recession, will more regulators insist on making debit payment options a priority at checkout? We believe the answer is a definite yes. Sweden is probably the first of many governments to care about consumers in this way. However, with the increase in the use of bank transfers and e-wallets, we believe consumers’ payment preferences are moving in this direction.

For many westernized markets – but certainly not all – credit and debit cards have been popular payment methods for consumers. However, alternative payment methods such as bank transfers, e-wallets, cash payments, and other types of payment currently constitute the vast majority of e-commerce transactions globally; they should go from over 65% to over 72% by 2023. Indeed, the language has evolved within the industry in recent years towards “local” payment methods, as these types of payment are no longer the alternative; they are the norm. Acceptance of local payment methods is vital to boost cross-border business and buyer conversion rates.

As a trend that we are seeing emerging globally, wire transfers are already the primary form of payment in Europe. Bank transfers are the preferred payment method in European countries as in the Netherlands (which represent 65% of e-commerce transactions), Finland (57%), Germany (52%), Poland (47%) and Austria (46%). In fact, 24% of Swedes prefer to pay by wire transfer when shopping online, and in the UK – typically a card-centric payments market – wire transfers have doubled in popularity over the past three years. Even through the APAC market, wire transfers are popular in Malaysia (46%) and Indonesia (29%).

It’s no surprise that many consumers around the world prefer to pay by wire transfer when shopping online. It is generally a very smooth user experience: Consumers pay directly and instantly from their bank account by manually entering payment information. And this method has many advantages for consumers over card payments. Buyers don’t need to enter sensitive financial data, they receive instant payment confirmations, and can feel confident making purchases without accumulating credit.

The experience is just as fluid for traders; they can enjoy guaranteed payment and no risk of chargebacks. And above all, in light of the new Swedish regulations, this is a debit payment.

Accept bank transfers to increase conversion rates

The new Swedish legislation and the general trend towards paying online by bank transfer in real time is good news for consumers and merchants. After all, providing a simple payment experience for consumers benefits merchants in the long run.

The new PPRO study found that 44% of UK consumers would abandon a purchase if their preferred payment method was not available. This rises to 51% for Millennials. Any breach of consumer preferences during the checkout process means that many customers will abandon their carts at the very last hurdle.

With cart abandonment rates as high as 80% on average, providing the correct payment methods at checkout is mission critical. And for European consumers and emerging global markets, any optimized payment mix must include wire transfers.

James Booth, Vice President, Head of Partnerships, EMEA at PPRO