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Over 100 Norwegian banks join forces in mobile payments

Nordic banks form an alliance on mobile payments and take over the Vipps platform

A group of Norwegian banks are joining forces to take over peer-to-peer mobile payment app Vipps, which was developed by DNB, Norway’s largest financial services group.

The move is in response to growing competition in the mobile wallet market. “We believe the alliance will make us better equipped to win the race against Nordic and international competition,” said Rune Garborg, head of Vipps at DNB.

Vipps will be spun off as an autonomous company from DNB, which will retain 52% of the new joint venture. The rest of the shares will be acquired by the SpareBank 1 alliance (25%), the Eika alliance (10%), Sparebanken Møre (1%) and 15 independent savings banks (12%). Signatories to the letter of intent represent a total of 106 Norwegian banks.

The alliance see this as an efficient and cost-effective way to develop Vipps and fight off competition with a single mobile wallet offering.

The joint venture will also absorb some of Vipps’ previous competitors in Norway, notably SpareBank 1’s mCASH, which offers many of the same features.

“Several market participants are competing to launch their own mobile payment solutions,” said Finn Haugan, CEO at SpareBank 1 SMN. “A lot of people find this confusing, whether they are making payments or are receiving them. Even though we have taken a firm market position in a short amount of time through our mCASH initiative, many of our customers have expressed a preference for one solution – a single strong and distinct provider.”

Vipps was launched by DNB in June 2015 as a peer-to-peer payment app modelled on its Danish competitor Danske Bank’s MobilePay, which entered the Norwegian market a few months later. Since then, DNB has expanded the system to cover mobile, e-commerce and in-store payment systems in cooperation with IT supplier Tata Consultancy Services. Garborg said this collaboration in IT and technical development would continue, at least in the short term.

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According to DNB, Vipps currently has more than 2.15 million private and 30,000 corporate users in Norway and is used to carry out an average of 204,000 transactions a day.

By comparison, MobilePay claims to have more than 210,000 users in Norway and 3.2 million customers in its home country, Denmark. MobilePay has also struck a partnership with Nordea, the largest bank in the Nordics.

Frode Lervik, financial services expert at PA Consulting, said the new venture represented consolidation in the Norwegian market. Instead of Vipps competing against other bank services, it will remain as the only major bank-operated competitor.

But although Lervik believes this strengthens Vipps’ position in Norway, he said there would be no lack of competition as MobilePay is still a contender and new companies, such as Swedish payments firm Klarna, are gaining market share in certain segments.

“Also, international giants such as Apple, Google and Samsung are likely to want to enter the market and Facebook, with a massive user base, is positioning itself as well,” said Lervik. “And, of course, there are the fintechs and others looking to disrupt the market, wanting to take advantage of new European regulation such as PSD2 [the revised Payment Services Directive] that will take effect from 2018.”

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