Expanding into Sweden can open up your business to a vast market. Sweden’s e-commerce usage ranks among the highest in Europe, with 8 million customers across Sweden and 77% e-commerce penetration, according to a 2022 report. Supporting customers in Sweden requires an understanding of popular payment methods, intricate regulatory hurdles, and the country’s main payment security concerns.

Below, we’ll explain what businesses can do to succeed in this market, including:

• Prioritising mobile payments
  
• Elevating security standards
  
• Understanding the broader European market
  

The state of the market

Sweden is a leader in payment innovation, and consumers in Sweden prefer digital and cashless transactions. Credit and debit cards and mobile payments are common, and although cash payments have not disappeared entirely, they are rare. Although Sweden is a member of the European Union, the country’s official currency is the Swedish krona (SEK).

Payments in Sweden follow a mix of local regulations and broader European payment regulations. Sweden’s adherence to EU regulations means institutions such as the European Central Bank play an influential role, especially in guiding frameworks such as the revised Payment Services Directive (PSD2), which significantly affects payment services in Sweden.

Sweden’s central bank, the Riksbank, leads the country’s financial regulatory structure. It is the world’s oldest central bank and has overseen Sweden’s monetary policies since the 17th century. Additionally, the Financial Supervisory Authority (Finansinspektionen) plays a pivotal role by ensuring banks and financial institutions operate in a manner that protects consumers.

Payment methods

The use of cash in Sweden is waning due to newer solutions, shifting consumer habits, and a regulatory environment that prioritises other payment methods. Let’s take a closer look.

Current usage

Consumers in Sweden have embraced digital payments: among those surveyed in 2022, only 8% said that their most recent in-store purchase was made with cash. According to a 2020 Riksbank report, a majority of card payments are contactless, and a 2022 Riksbank report found that 90% of those surveyed had made a payment with a card in the last 30 days.

Mobile payment apps such as Swish, which was launched in 2012 by six Swedish banks and has 8.5 million users, have had a large impact on in-person and e-commerce payments. The mobile point-of-sale (POS) payment market in Sweden is projected to surpass $24 billion USD in 2024, highlighting the growth of mobile payments for in-person transactions. Klarna, a buy now, pay later (BNPL) company based in Stockholm, has also transformed the e-commerce payment experience by promoting instalment payments.

Popular B2C payment methods in Sweden

• Credit and debit cards
  
• Mobile payments (e.g. Swish)
  
• BNPL (e.g. Klarna)
  

Popular B2B payment methods in Sweden

• Credit and debit cards
  
• Mobile payments
  
• Bank transfers (e.g. Bankgirot/Autogiro)
  

Emerging trends

Sweden’s experimental e-krona pilot project is testing a central bank digital currency (CBDC) that would provide an alternative to the digital currency (such as cryptocurrency) available from the private sector. The Riksbank started the e-krona project in 2017, and it completed the technical pilot in 2023. If implemented, e-krona could strengthen Sweden’s position as an innovator in the global payments arena.

Ease and friction of entry

Businesses that want to accept payments in Sweden must consider areas such as taxes, chargebacks, cross-border payments, and payment security and privacy. Here’s a closer look.

Taxes

Sweden’s value-added tax (VAT) is a significant factor for businesses. With a general VAT rate of 25% for most goods and services, it’s among the highest in Europe. There are reduced rates for certain items, such as food and books, at 12% and 6% respectively. For consumers, this tax is reflected in purchase prices, and businesses are responsible for collection and remittance to the Swedish Tax Agency. Incorrect VAT filings can lead to financial penalties for businesses.

Chargebacks and disputes

Sweden’s approach to chargebacks and disputes integrates European standards for consumer protection with its own. Sweden follows PSD2, which emphasises Strong Customer Authentication (SCA). PSD2 affects chargeback cases because a business’s compliance with SCA standards can affect dispute outcomes.

Beyond EU regulations, the Swedish Consumer Sales Act ensures customers have extensive rights, such as the right to enter a complaint to a business about faults or defects in a product for up to three years, and the right to cancel a purchase made online within 14 days.

International payments

Understanding cross-border payments in Sweden is important, whether your customers are tourists or large international businesses.

• Currency conversion
  Accepting transactions that originate outside Sweden, from international credit card payments to wire transfers, will probably require currency conversion. Normally, the rates for these conversions are slightly higher than the interbank rate (the rate at which banks buy and sell currency among themselves), and conversion fees range between 1% and 3%. Several third-party platforms that facilitate currency conversion in Sweden, such as Stripe, can help simplify this process for businesses.

• Fee transparency
  Because Sweden adheres to PSD2, which emphasises transparency in conversion rates and associated fees, all financial entities that operate in Sweden must provide comprehensive summaries of fees and conversion costs.

Security and privacy

Sweden’s emphasis on payment and data security protects consumers and businesses from fraud. Here are the highlights of Sweden’s security environment:

• Data protection standards
  Data protection in Sweden is governed by the General Data Protection Regulation (GDPR), an EU regulation that standardises the safeguarding of personal data across member states. Under this regulation, organisations must obtain explicit consent before collecting data, and give individuals a right to access, correct, and erase their data. The Swedish Authority for Privacy Protection oversees GDPR enforcement.

• Strong Customer Authentication (SCA)
  Under PSD2, Sweden requires SCA for electronic transactions. Essentially, a transaction can proceed only with two out of three possible authentication methods: something the customer knows (such as a password), something they possess (such as a card), or something they are (such as a fingerprint).

• Anti-Money Laundering (AML) regulations
  Sweden adheres to the EU’s AML directives. Financial institutions in Sweden are required to maintain comprehensive records and conduct thorough due diligence checks, especially when dealing with high-value transactions or clients from regions known to have high financial risks. The Financial Intelligence Unit, a unit within the Swedish Police Authority, oversees AML efforts – scrutinising and acting on suspicious activities.

• BankID usage
  In 2021, around 8.2 million Swedish people used BankID, a leading electronic identification mechanism. Beyond banking, it offers a variety of services – from signing documents to verifying identity online. BankID has multiple layers of security that safeguard transactions.

• Finansinspektionen’s oversight
  Finansinspektionen, the Financial Supervisory Authority in Sweden, plays a central role in overseeing the security, compliance, and regulation of financial operations – from licensing banking operations to confirming financial companies follow set norms.

Key success factors

Although Sweden’s payment environment is advanced, it contains challenges that stakeholders must be aware of. A deeper understanding of these challenges can facilitate better decision-making for businesses.

• Reduced reliance on cash
  As cash becomes less important to Sweden’s market for payments, businesses that conduct in-person sales can benefit from accepting a range of digital payment methods. However, continuing to accept cash – while also offering digital alternatives – can help prevent alienating an older customer segment. A 2020 Riksbank report found that a majority of people ages 65 to 84 felt negatively about the use of cash declining in society, highlighting the elderly’s continued reliance on cash payments.

• Mobile payment options
  Businesses that process POS and e-commerce transactions should offer customers a range of mobile payment options. An array of POS tools that support QR codes and near-field communication (NFC) technology for contactless payments can help businesses accommodate the growing demand for mobile payments.

• Enhanced cybersecurity measures
  With an increase in digital payment solutions comes a higher risk of cyber threats. Data from the Swedish National Council for Crime Prevention showed that 3.7% of the population self-reported exposure to card or credit fraud in 2022. The potential vulnerabilities associated with credit cards and other digital payments requires businesses to implement customer authentication measures and audit cybersecurity protocols regularly.

• Strict regulatory compliance
  The EU regulations Sweden enforces, such as the GDPR for data protection and PSD2 for payment services, impose significant compliance requirements on businesses and can be a complex and resource-intensive endeavour. Investing the necessary time and money into compliance from the start will help businesses avoid major fines.

Key takeaways

Businesses that accept payments in Sweden can make their customers’ payment experiences as smooth as possible through a series of adaptable strategies. Here’s a recap, along with customised tips for Sweden’s unique payment environment.

Prioritise mobile payments

• Keep the mobile experience front and center
  Optimising your payment gateway for mobile is a necessity. Ensure your business has a seamless mobile payment experience, with an emphasis on interface design and transaction speed.

• Integrate mobile apps such as Swish
  Accept payment options that expedite payments and meet the expectations of a mobile-savvy consumer base, such as Swish and global digital wallets such as Apple Pay and Google Pay.

• Focus on eco-conscious payment solutions
  Choose payment processes that support environmental sustainability. For example, eliminate paper receipts, or partner with platforms that support carbon offsetting.

Elevate security standards

• Bolster security without compromising on speed
  Combine quick transaction speed with advanced security measures – such as real-time fraud detection – for customers’ convenience and peace of mind.

• Recognise the importance of BankID
  Leverage the Swedish familiarity with BankID by implementing it for identity verification and streamlining the process for customers.

• Mitigate credit card fraud at every stage
  Verify customers’ identities through two-factor authentication, address verification system (AVS), and card verification value (CVV) checks to prevent credit card fraud. Establish rigorous protocols for storing customers’ card data.

Understand the broader European market

• Maintain multi-currency support
  Although Sweden uses the Swedish krona, a multi-currency support system will allow businesses to serve customers from anywhere in Europe. This is especially relevant for businesses that support tourists or handle international transactions.

• Stay updated on regulatory nuances
  Sweden adheres to EU regulations that affect payments, including the GDPR and PSD2. Keep up-to-date on Swedish and EU financial regulations to prevent disruptions to your payment processes.