New technology is removing barriers and increasing opportunities for merchants trading into and out of Denmark, as they can now bypass the slow, costly, and outdated correspondent banking networks, according to Banking Circle
With high internet penetration, booming ecommerce, a population of high-spenders and a heavy reliance on imports, Denmark could well be one of the most desirable markets for merchants looking to expand across borders. It even boasts something close to friction-free cross border payments, due to being in the SEPA zone.
97% of Danes are connected, and online shopping now accounts for 11% of all retail spending in the country. According to a recent J.P. Morgan report, more than half of Danish shoppers (55%) made a cross-border purchase in 2020, accounting for 22% of the entire ecommerce market.
But it is not all plain sailing for businesses looking to serve Danish demand, even if they are close neighbours. Not being in the Eurozone, Denmark is still dealing with the inevitable delays and costs of currency conversion when sending and receiving cross border payments. This continues to cause issues for many merchants—both inside and outside of Danish borders.
In 2020, Banking Circle carried out a market research project, the results of which are published in a whitepaper, ‘Better business banking: Collaborating for success’. The study revealed that 70% of banks across Europe consider cross-border payments to be a core banking service. Yet the offering remains too slow, too expensive, and ultimately inaccessible to many businesses.
International payment barriers
Sadly, the new P27 initiative does not go quite far enough to resolve the challenges still faced by those wishing to trade with Denmark. P27 aims to bring together a fragmented payments infrastructure in the Nordic region, with Denmark and Sweden being the first to enable a unified batch infrastructure to be carried out quickly and securely on a single platform. This will resolve issues with legacy infrastructure between these specific countries, where trade is already well established, but it does little to smooth the terrain for merchants in other regions.
Payments businesses and banks in the region must therefore continue to depend on outdated and expensive correspondent banking networks, making Denmark a less appealing market for their global ecommerce clients to serve. As such, merchants based outside of Denmark are not able to take full advantage of the population’s increasing appetite for cross-border trade.
With China, the UK, Germany and the Netherlands making up a high proportion of imports to Denmark, it’s crucial that payment service providers and banks based in these countries and others are able to provide the payment infrastructure required to support their underlying ecommerce clients.
The good news is that new technology is breaking down these barriers and opening the way for faster, lower cost cross-border trade. Modern payments banks, such as Banking Circle, are using the latest technology to build a local clearing network for major currencies. With direct clearing capabilities for the Danish krone, connecting to Denmark’s national intraday payment system, we are reducing friction for banks and non-bank financial institutions by giving them access to fast, low-cost payments and collections.
This removes barriers and increases opportunities for merchants trading into and out of Denmark, as they can now bypass the slow, costly, and outdated correspondent banking networks.
Learn more about Banking Circle’s Danish krone direct clearing offering here.