Paypal’s newly-launched 'Friends Payment Service' has arrived in Norway to offer an easy solution to cashless financial transactions. Up until now, the payment application Vipps, has been the main provider of such services in the Scandinavian country.
Vipps has been around for some time, and has come a long way from being a project by Den Norske Bank (DNB) to taking part in the group that handles Bank ID and the payment network BankAxept.
How is Paypal different?
Vipps requires the telephone numbers of senders and recipients to complete transactions, whereas Paypal just needs email addresses. One of the major advantages offered by Paypal is zero transfer or processing fees.
Paypal claims this will allow users to benefit from their services when buying and selling goods. Vipps, on the other hand, charge one percent on transactions over NOK 5,000.
Another aspect that set the two apart is that Vipps only works on a national level in Norway, whereas Paypal allows users to directly transfer money to people in 25 different countries.
The convenience factor
Arvid Torset, CTO and co-founder of Norwegian fintech startup Diggecard, sees the ability to send money internationally as a salient feature of Paypal. Whilst Torset acknowledges that he does not have email addresses to all of his friends on hand, using that kind of option is still far more convenient than conventional banking.
“I am connected either through phone numbers or social media,” he says. “Still, sending money with email is far more user-friendly than using bank account numbers. People also tend to protect bank account numbers for obvious security reasons.”
He adds that most people, including himself, do not remember their private bank details and this is one of the reasons that Paypal’s latest service is so convenient.
Big advantages for smaller scales
Flexrock AS Sales Director and TOPTOURS.NO founder Arunas Jonas Kastenas, says the service can provide an interesting payment solution for friends. He also regards it a convenient way to complete short and simple transactions.
“Eventually, it could even work as a payment [method] for some small services. However, I do not see it as being used for large payments,” he continues. Kastenas also highlights that this service does not require people to ‘go’ anywhere and it helps them avoid the multiple verification processes required when making payments through banks.
Simplicity is key
“It is all about the ease of use,” Arvid Torset emphasises. “With banking, I [first have to] look up my account number, give it to the sender and then I can receive the money. The bank account number can also change without notice, so it might not be valid the next time,” he says.
The process is even more complicated when sending money abroad. “You have to figure out IBAN/BIC numbers which are not easily accessible in many cases,” Torset outlines. He says such information is hard for people to give up unless a transfer is significant. “You will not do it for like NOK 100”, he continues.
Torset draws the conclusion that as long as the transfer remains free of charge, there is no need to use conventional banking for such purposes. As a Vipps user, he also sees the advantages of such services.
“I can send and receive small and bigger amounts of money. I can also pay on many locations through Vipps,” he says. Torset adds that people need to trust their service provider and they can rely on Vipps in Norway at the moment.
Keeping it traditional
While Kastenas has previously pointed out the advantages of mobile payment solutions, he is yet to be lured in by what he calls, “common solutions”. “I just don’t need them and I like to plan my finances in advance. Therefore, this doesn’t work for me,” he says.
When asked about possible advantages of conventional banking, Kastenas argues that the older methods of invoicing are important for business-related transactions, “especially when you are doing business with a customer from abroad, in most cases you have to issue an invoice if it is a larger sum”.
He adds that in some instances clients prefer to pay with a credit card, and conventional banking is the best method for this purpose. On the other hand, Kastenas is quick to highlight that if Paypal [or others] can create viable invoicing functionalities in the future, fintech giants could certainly replace conventional banking.
For the time being however, he sees the technologies as being in their early stages. “They will need to do more to convince me [to start using these services]. Right now, I can survive without them.”
Taking into account the views of stakeholders, Vipps has shown to be an established service which is widely used in Norway. Users say its method of using telephone numbers instead of email addresses seems to work to its advantage.
Meanwhile, it will be interesting to observe whether Paypal can make inroads and lure a bigger chunk of users with its ability to make international payments and through its policy of not charging fees, regardless of the amount.
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