E-commerce Payments Trends: Finland

Online shopping growth supported by low unemployment

Finland’s e-commerce market is set to record double-digit growth rates up to 2021, making it one of the most dynamic out of the European countries studied in this report series.* This is helped by the economy, which saw gross domestic product increase by an estimated 2.5 percent in 2018.² Rising employment and increased household disposable income is supporting private consumption, a trend that is expected to continue throughout 2020.³

In 2018, the unemployment rate fell to an estimated 7.8 percent from 8.6 percent in 2017.⁴ By 2020, unemployment is expected to have fallen further to 6.9 percent.⁵ These trends bode well for the e-commerce sector, which has lagged behind its peers in the Nordic region in recent years.⁶ Growth of online sales is expected to outpace overall economic growth and expand at a combined annual growth rate of 11 percent to 2021.⁷

Why is online shopping in Finland accelerating?

The business to consumer e-commerce sector in Finland has been growing at a double-digit rate in recent years and is now worth €8.5 billion.¹⁸ Growth in the value of orders has been outstripping volume increases, which has been positive for the sector.¹⁹ If the Finns can be persuaded to broaden the range of goods they buy online, the growth rate of e-commerce in future years could possibly exceed the compound annual growth rate of 11 percent, currently forecasted between the years of 2017 to 2021.²⁰

Although e-commerce is becoming increasingly embedded in Finnish society, online shopping habits are in some ways very different from those of the other Nordic nationalities. Finns are less likely to buy food and groceries,²¹ but more likely to buy from foreign sites.²² Only nine percent of Finnish online shoppers buy food and groceries via e-commerce websites,²³ compared with 20 percent in neighboring Sweden, for example.²⁴

Low-value, high-volume goods

In acknowledgement of this opportunity, Finnish grocery retailers such as K-Group have invested heavily in expanding their online offerings.²⁵ The corresponding figures for household goods, another everyday staple, were only 26 percent in Finland²⁶ but 36 percent for Sweden.²⁷ Focusing on these low-value, high-volume goods might be a good strategy for merchants targeting the country.

Finnish online shoppers look abroad more than their neighbours

Cross-border commerce is common in Finland. Around 53 percent of online shoppers purchase products from abroad each year²⁸ and these transactions account for 22 percent of the market value.²⁹ In Sweden, by comparison, only 32 percent of online shoppers have purchased from abroad.³⁰

China is the biggest source of Finnish e-commerce imports, with 29 percent of Finns who had shopped online in the previous month buying from a Chinese site.³¹ Sites in Germany and Sweden are also popular.³² Finns are more likely than any other nationality in the Nordic region to buy clothes and shoes from foreign sites.³³

This heavy importing of e-commerce goods and services suggests that international e-commerce merchants have an excellent commercial opportunity to build upon existing demand for overseas products.

What is the outlook for Finnish e-commerce merchants?

Finnish e-commerce merchants will have to be aggressive on price if they are to seize a share from foreign competitors, due to the low prices offered by sites in China and elsewhere.³⁴

International merchants should be cognizant, however, of a change in Finns’ delivery expectations. Finnish online consumers are becoming less patient about waiting for their products, and this could increase the relative popularity of purchasing from domestic sites.

Finns used to have the lowest expectations among Nordic consumers for delivery times, probably because they purchased so much from abroad and accepted that this meant increased waiting periods.³⁵ This mentality has changed: in a 2018 survey, 61 percent of Finns said that they would like in the future to have same-day delivery – the highest percentage of any Nordic country.³⁶

Growth potential for mobile payments

Mobile commerce accounts for only 33 percent of total Finnish e-commerce,³⁷ amounting to €2.8 billion in sales.³⁸ This is a relatively low proportion compared with much of Europe,³⁹ and the sector remains immature in certain ways.

For example, when compared with other Nordic nationalities, Finnish consumers do not frequently use their smartphones to do research to make their experience of going to stores easier or more efficient. Only 21 percent of Finns have conducted research on the product they are considering purchasing, using their cellphones over the past three months, aside from when they were already in a shop. The Nordic average in comparison is 37 percent.⁴⁰ Furthermore, a mere 13 percent had done research on the product using their cellphone while in a store, compared with 25 percent for the Nordic nations as a whole.⁴¹

However, this low base of spending means there is a great potential for growth. Indeed, the expected compound annual growth rate up to 2021 is 18 percent, the highest in the Nordic region.⁴² This suggests that mobile commerce could within a few years account for more than half of all online sales – particularly as young people, whose share of national income will rise as they age, are avid mobile commerce users.⁴³

More than 60 percent of Finnish 17 to 29 year olds had bought physical items online in the past 30 days, according to a 2018 poll.⁴⁴

A total of 55 percent of Finnish mobile commerce was in-app rather than through browsers – a much higher percentage than in many European countries, such as the UK.⁴⁵ This increases the pressure on retailers either to create their own apps or to improve existing ones.

For example, one industry that is driving app innovation is ride-hailing platforms. These businesses have been quick to optimize and hone their apps for Finland and will drive high consumer expectations around the ease-of-use, quality and efficiency of payments when using apps.

What are the most popular payment methods?

The Finns trust their banks, which is reflected in their choice of payment methods. Verkkopankki, an online bank transfer system, accounts for about half of all purchases,⁴⁶ and 74 percent of Finns regard the option to make a direct payment via bank as “very important” or “quite important”.⁴⁷ Looking at how e-commerce payments are made, bank transfers are dominant, with a 57 percent share of total payments, worth €4.85 billion. Banks are, however, innovating in this area. Siirto, a joint venture between OP Bank, Nordea and Danske Bank, focused on bank payments, has 650,000 users in the country – 12 percent of Finland’s population.⁴⁸

The dominance of bank transfers is due primarily to the fact that Finns are still not particularly accustomed to online shopping and many people are not comfortable giving out their card details online.⁴⁹

Although the number of e-commerce-enabled cards is, at 2.3 per person, relatively high, card payments account for only 26 percent of all purchases, suggesting that they are not being used frequently. One issue might be fraud, with 16 percent of Finns citing concerns over payment security – a much higher figure than the seven percent for Sweden, for example.⁵⁰

Are Finnish consumers becoming more confident about payment security?

This lack of faith in payment security was undoubtedly exacerbated by the state highlighting issues with payment fraud in the media, after the number of reported incidences rose sharply amid concerns that Finnish customers had been too trusting when making transactions online.⁵¹ However, rates of fraud have since fallen considerably.⁵²

Finnish consumers are gradually embracing digital payments, with digital wallets now accounting for 12 percent of payments, or €1.02 billion.⁵³ PayPal® dominates among digital wallet providers, accounting for about 10 percent of total e-commerce payments in Finland.⁵⁴ The increase in digital wallet spending in value terms looks set to be rapid, at a compound annual growth rate of 28 percent,⁵⁵ with Finns embracing a means of payment that addresses their fears of providing card and other personal information to websites.

Chargeback rates plummet as Finns become more vigilant

According to Kount, chargeback rates for e-commerce transactions have fallen sharply over the past couple of years in Europe,^* hitting 0.06 percent in 2018.⁵⁶ This is a trend that is present in Finland as online shoppers in the country become more sophisticated consumers, who are better informed to make assessments about the likely quality of goods and services before they purchase.

The Finnish are particularly concerned about data theft when using online banking and payments systems. Almost half of the population is said to be afraid of data misuse when applying online banking, and 44 percent said they were concerned about the security of online payments.⁵⁷ Between January and June 2018, there were 2,900 recorded payment frauds – a 13.5 percent fall on the first half of 2017.⁵⁸

This suggests that vigilance from Finnish consumers is beginning to pay off and they are becoming more aware of the risks of online shopping. This is reflected in the fact that only two percent of Finnish online shoppers now experience fraud, compared with a figure of four percent in neighboring Norway.⁵⁹

To boost consumer confidence further, the Consumers’ Union Finland has launched the Huijausinfo.fi website, which shares information on scams targeting consumers. The website offers education and information about increasing personal security when shopping online.⁶⁰

Key takeaways

• The business to consumer e-commerce sector in Finland has been growing at a double-digit rate in recent years and is now worth €8.5 billion⁶¹
• Cross-border commerce is common in Finland. Around 53 percent of online shoppers purchase products from abroad each year⁶²
• Mobile commerce accounts for only 33 percent of total Finnish e-commerce,⁶³ amounting to €2.8 billion in sales⁶⁴
• Bank transfers are dominant, with a 57 percent share of total payments, worth €4.85 billion

To learn more about payment trends in the world’s leading e-commerce markets, contact your J.P. Morgan representative or call us on:

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About J.P. Morgan

J.P. Morgan offers a full suite of payments services to enable a seamless connection across the payments continuum for clients. We bring our consultative expertise, data-driven insights, and local service around the globe to provide a more unified view of payables, receivables and cash management. Merchant Services is the payment acceptance and merchant acquiring business of JPMorgan Chase & Co. (NYSE: JPM) – a global financial services firm with assets of $2.6 trillion and operations worldwide.ⁱ According to The Nilson Report, it is also the top merchant acquirer of e-commerce transactions in Europe.ⁱⁱ

ⁱ JPMorgan Chase & Co. Q4 2018 Earnings Report 2018.

ⁱⁱ The Nilson Report, #1132 May 2018.

This document is based on projected figures and is subject to change at any time. Data may vary from historical figures, due to certain categories being re-stated as new information sources have become available.

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