The Nets story
Nets, the result of a strategic merger between Denmark’s PBS and Norway’s BBS in 2009, has grown to become a significant force in the European payments industry. With the acquisition of Finland’s Luottokunta in 2012, the company catapulted into the top league of European payment processors. Nets has demonstrated a remarkable ability to navigate the complex landscape of financial technologies by not only expanding its geographical reach but also broadening its services portfolio to encompass everything from card transactions and electronic payments to identity services.
In June 2021, Nexi and Nets announced a significant development in their journey to become a European PayTech leader by signing a merger deed. This all-share merger was designed to create a powerhouse in the digital payments sector, combining the strengths and market reach of both groups. As a result, Nexi not only increased its exposure to fast-growing and underpenetrated markets but also positioned itself to take advantage of both organic and inorganic growth opportunities. The merger expanded Nexi’s addressable market fourfold compared to its standalone capabilities, setting a solid foundation for the company to leverage favorable industry dynamics, such as the accelerated shift towards digital payments and a rising demand for comprehensive payment services across Europe.
The merger came at a time of widespread consolidation within the payments sector, reflecting a broader trend of companies combining forces to better navigate the rapidly evolving digital landscape and compete more effectively on a global scale.
Denmark as a Fintech hub
The financial technology landscape in Denmark, the headquarters for Nets, remains a vibrant one, characterized by robust growth and a focus on innovation and consumer protection. In 2023, the value of card transactions in the Danish cards and payments market reached a notable $109.81 billion. Despite facing challenges such as rising inflation, unemployment, and geopolitical uncertainties, this market is expected to grow at a Compound Annual Growth Rate (CAGR) of more than 4% from 2023 to 2027.
For companies like Nets, operating in such a dynamic regulatory environment presents both challenges and opportunities. The recent regulatory shifts could affect the services they offer and their operational strategies, particularly in areas like payment processing and consumer finance. However, these changes also open up new avenues for innovation, as adapting to and anticipating regulatory changes can lead to the development of new products and services that meet the evolving needs of consumers and the market at large.
The company’s evolution is closely tied to the broader trends in the fintech sector, particularly in Denmark where a highly educated and digitally literate population, coupled with a high degree of digitization of public sector systems, has facilitated rapid growth. Government policies aimed at promoting fintech innovation have also played a crucial role. For instance, the Danish government’s support has transformed Copenhagen into an international fintech hub, further supported by the establishment of a dedicated fintech lab under Copenhagen Fintech in 2016.
In this seemingly nurturing ecosystem, Nets has flourished by strategically aligning itself with the evolving dynamics of the financial industry. Instead of positioning itself in competition with traditional financial institutions, Nets has sought successful partnerships, reflecting a broader industry trend where fintech companies are increasingly collaborating with established financial entities. These partnerships have been pivotal, allowing Nets to integrate more deeply with the financial ecosystems across Europe.
Buy Now Pay later
A key aspect of the ongoing evolution in the payments sector has been the regulatory scrutiny surrounding ‘Buy Now-Pay Later’ (BNPL) schemes. These financial products, which allow consumers to purchase goods and services at the point of checkout, and defer payment to a later date, had previously operated without specific legislative oversight in Denmark. This situation allowed BNPL schemes to function without the fees or interest typical of traditional consumer loans. See Loopline Media’s article on market leader Klarna.
However, recent developments have significantly altered the regulatory landscape. Following negative media coverage and concerns about potential consumer indebtedness, the Danish government, through the Minister of Commerce, implemented stricter regulation of BNPL schemes. Effective from July 2023, these regulations mandated that BNPL providers conduct creditworthiness assessments and apply for consumer lending licenses. These requirements align BNPL offerings with other types of consumer loans and introduce safeguards such as mandatory registration, a duty to provide comprehensive information to potential borrowers, and a cooling-off period.
These changes reflect a broader regulatory trend in which financial services, particularly those involving credit, are coming under increased scrutiny to ensure consumer protection. The Danish approach, it appears, balances fostering fintech innovation with safeguarding consumer interests, ensuring that new financial products and services operate within a framework that promotes transparency and responsible lending.
The company operates under the strict oversight of the Financial Supervisory Authority, adhering to stringent regulations including anti-money laundering laws and various consumer and competition-oriented rules. This regulatory compliance has not only ensured the company’s operations remain above reproach but has also instilled trust among its partners and customers.
Nets’ ability to harness technological advancements, engage in strategic partnerships, and navigate complex regulatory landscapes will likely continue to play a pivotal role in its story.
Disclaimer: This document offers a brief overview of Nets to benefit retailers and is for informational purposes only; it is not legal or financial advice.
