2023 Survival Guide: Why BNPL Must Ditch Gross-Merchandise Volume To Thrive

Money20/20 is off to Stockholm next week for our first World Tour event of the year, bringing our unique brand of party to the fintech community of Sthlm Fintech Week Sthlm Fintech Week. Since it’s going to be Valentine’s Day, we thought a good talking point would be how Gen Z are treating their loved ones this year. What are the payment preferences for these diverse, digitally native youngsters that inhabit one of the most cashless regions of the world?

Well, a few basics… they’re not stingy. Nearly half are spending 500 SEK or more ($50-ish). They’re thinking this through, with more than half buying a gift a week or more before, and most of them are making their purchase online. They’re also likely to be using loyalty point where they can in over 40% of purchases. These characteristics all seem “on brand” for this coveted group of consumers. We are told that they are fiscally responsible and digitally native.

However, the characteristics of how they pay are a little surprising…

For an overview of the complete survey download it here.
For a detailed version of the complete survey download it here.

Traditional credit / debit cards are still the top way to pay, with over a third of Gen Z using these to buy their valentines gifts. 18% are using “Swish”, the native bank owned payment network, and 17% BNPL, which isn’t surprising given that some of the largest Buy Now Pay Later companies in the world are based there. But, 5% are still using cash.

In the “cashless” culture of Scandinavia, with the most digitally astute demographic, why would cash be used at all?

It’s an interesting question. Sweden is reported to have less than 10% of payments made in cash (1), dropping from 40% in 2010, so cash is significantly less than it was, but not zero. And it’s understandable that perhaps certain transactions don’t want to be traceable by significant others if the surprise gift is going to truly be a surprise.

However, the fiscally responsible attributes of Gen Z may have a part to play in the continued use of cash. We know that as a cohort these individuals are more likely to track their spending than other generations, and you can’t spend cash you don’t have. There may also be, paradoxically, a cool factor to using something as retro as cash – these digital natives may well be a little sick of all things digital. And there is also the consideration that this generation is between the ages of 10 and 25 as of 2023 – there is a possibility that some don’t have access to any other form of payment other than a weekly cash allowance (although the younger Gen Zers are probably not likely to be making valentines day purchases, or in fact participating in our survey).

Nonetheless, cash is tenacious and despite ongoing stories of its demise, it remains a persistent part of the payment mix, even in a region that has always been at the forefront of digital transactions.

So what would be required to really make cupid cashless for Valentine’s Day? Any replacement would have to match some or all of these attributes – anonymity, ubiquity, analog, trustworthy. With the push for CBDCs, we can expect that some of these will be met, but there is still the requirement for the “D” in CBDCs, meaning that the offline experience of cash couldn’t easily be replicated. Smartphone penetration in Sweden has reached 93% (2), but that’s not universal, and the digital payment users will be a subset of this group. Further, the anonymity of cash isn’t guaranteed with digital payments – CBDCs could be used to track citizen spending, and for the more conspiracy theorist out there be perceived as a beachhead to “programmable money” that can only be used for certain transactions.

For all of the hubris about Scandinavia going cashless, the rumors of its demise seem greatly exaggerated.

If you’d like to discuss this further, we’ll be unpacking the payment trends of Swedes at our event in Stockholm next week along with Ville Sointu, Head of MFS Solutions & Strategy, Ericsson, Christoffer Malmer, Head of SEB Embedded, SEBx, and Anna Blyablina, Co-founder, Board member, Sthlm Fintech Week / Form3. Tickets are free but limited…

Please RSVP here.

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(1) https://www.riksbank.se/en-gb/payments--cash/payments-in-sweden/payments-in-sweden-2020/1.-the-payment-market-is-being-digitalised/cash-is-losing-ground/
(2) https://www.statista.com/statistics/568272/predicted-smartphone-user-penetration-rate-in-sweden/