In-Store Mobile Payment in Western Countries: a Study on Readiness and Adoption

DEGREE PROJECT IN MECHANICAL ENGINEERING, SECOND CYCLE, 30 CREDITS STOCKHOLM, SWEDEN 2021

In-store mobile payment in western countries: A study on readiness and adoption

XINYU LI

YI LIU

KTH ROYAL INSTITUTE OF TECHNOLOGY SCHOOL OF INDUSTRIAL ENGINEERING AND MANAGEMENT

In-store mobile payment in western countries: A study on readiness and adoption

Xinyu Li Yi Liu

Master of Science Thesis TRITA-ITM-EX 2021:475 KTH Industrial Engineering and Management Machine Design SE-100 44 STOCKHOLM

Examensarbete TRITA-ITM-EX 2021:475

Mobilbetalning i fysisk handel i västländer: En studie om förutsättningar, tillämpning och spridning

Xinyu Li Yi Liu

Godkänt Examinator Handledare 21-07-02 Sofia Ritzén Jennie Björk

Uppdragsgivare Kontaktperson Klarna Matthew Perkins

Sammanfattning Syftet med detta examensarbete är att undersöka karakteristikerna som bidragit till den snabba tillämpningen av mobilbetalning inom fysisk handel i Kina samt undersöka beredskap och förutsättningar i västländer för att ge förslag på utveckling av mobilbetalning baserat på dessa karakteristiker.

Litteraturstudien identifierade karakteristiker i Kina såsom förtroende för mobilbetalningar, förväntningar på snabba transaktioner, snabb och enkel autentisering, villighet att dela personuppgifter, låg konsumentkreditnivå, hög användning av QR koder för betalning, passande utvecklingsmiljö, priskänslighet, social influens, hög användning av kontanter, låg användning av NFC och låg tillgänglighet av olika betalningsalternativ. Karakteristikerna användes för att skapa ett frågeformulär och en semistrukturerad intervjuguide för att samla in data från västländer med hjälp av experter på Klarna. Undersökningen bestod av femton länder, och data från 12 intervjuer och 15 frågeformulärsvar samlades in.

En kvalitativ analys genomfördes sedan på undersökningarna och intervjuerna, varpå länderna kunde kategoriseras i fyra kategorier av beredskapsnivå med respektive rekommendationer för de bästa sätten att utveckla mobilbetalning inom fysisk handel. Förutom betalningsfunktioner rekommenderas även ideér för att locka nya användare och förbättra aktiv användning baserat på analysen av de olika marknaderna.

Master of Science Thesis TRITA-ITM-EX 2021:475

In-store mobile payment in western countries: A study on readiness and adoption

Xinyu Li Yi Liu

Approved Examiner Supervisor 21-07-02 Sofia Ritzén Jennie Björk

Commissioner Contact person Klarna Matthew Perkins

Abstract The purpose of this master thesis is to investigate the characteristics that made in-store mobile payment in China fast and highly adopted and to give suggestions for developing in-store mobile payment in western countries with the readiness of these characteristics.

From the literature study, several characteristics are identified, including trust in mobile payments, expectation of fast transactions, quick and easy authentication, willingness to share personal data, low level of consumer credit, high adoption of QR codes for payment, friendly development environment, price-sensitive, easily influenced by other people, high cash preference, low adoption of NFC, and low availability of different payment options. The characteristics were used to create survey questions and a semi-structured interview guide for collecting data in the western countries with experts within each market at Klarna. The research consisted of fifteen countries, and data from 12 interviews and 15 survey answers were collected.

A qualitative analysis was then conducted on the surveys and interviews, and countries were categorized into four categories of readiness and recommended development opportunities and directions in-store mobile payment features respectively. Besides payment features, recommendations for attracting new users and improving users’ stickiness have also been suggested based on the analysis of the different markets.

FOREWORD

This master thesis was written by Xinyu Li and Yi Liu at the Royal Institute of Technology in Stockholm, Sweden in the spring of 2021.

We would like to thank Jennie Björk, our supervisor in KTH, for always supporting us and caring throughout the thesis and the potential difficulties, your guidance for the direction of the research, and kind reminders of the things that we need to think about in advance, let us be well prepared for challenges.

We would also like to thank Klarna and our industrial supervisor Matthew Perkins for the opportunity to work on this project and for providing crucial insights and knowledge during the research design and collection of data as well as the guidance and support throughout the thesis.

Xinyu Li and Yi Liu

Stockholm, June 2021

NOMENCLATURE

Below are the abbreviations that are used in this master’s thesis.

Abbreviations

BLE Bluetooth low energy NFC Near field communication OTP One time password POS Point of sale P2B Peer-to-business P2P Peer-to-peer QR code Quick response code SMS Short message

AU Australia AT Austria CH Switzerland DE Germany DK Denmark ES Spain FI Finland FR France IT Italy NL Netherlands NO Norway PL Poland SE Sweden UK United Kingdom US United States DACH Germany, Austria, Switzerland

TABLE OF CONTENTS

1 INTRODUCTION 1 1.1 Background 1 1.2 Purpose and research questions 2 1.3 In-store mobile payment options today 2 1.3.1 In-store mobile payment in Asia 2 1.3.2 In-store mobile payment in Western countries 4 1.4 Delimitations 6

2 LITERATURE STUDY 7 2.1 Diffusion of innovation and S-curves 7 2.2 Halo effect 9 2.3 Characteristics from literature review 10 2.3.1 Trust in mobile payment and Sense of security 10 2.3.2 Price sensitivity and group influence 11 2.3.3 Attitudes towards credit 12 2.3.4 User experience 13 2.3.5. Environment 13 2.3.6 Adoption level 14 2.4 Final characteristics and questions 15

3 METHODOLOGY 18 3.1 Research design 18 3.2 Data collection 19 3.3 Data analysis 20

4 RESULTS AND ANALYSIS 22 AU 23 DE/AT/CH 26 ES 32 FR 35 IT 39 PL 48 SE, and NO/FI/DK survey only 52 UK 57 US 60 4.1 Overview of similar, different, special characteristics of each market 64 4.2 Comparison of markets 65

5 DISCUSSION 68 5.1 Mobile payment today 68 5.2 Difficulties in entering markets 69 5.3 Ideas for further development 70 5.3.1 Primary payment solutions 70 5.3.2 Provide end-to-end service and smooth shopping experience 74 5.3.3 Attract new users and improve stickiness 77

6 CONCLUSION 79

7 LIMITATIONS 80 REFERENCES 80

APPENDIX A Appendix A:1(4)

APPENDIX B Appendix B:1(2)

APPENDIX C Appendix C:1(12)

1 INTRODUCTION

This chapter introduces the background of the project, Klarna as a company, and the purpose of the study. The purpose and objectives are presented with the research questions, as well as the delimitations that have been made for the project.

1.1 Background Traditionally consumers pick up the goods they want in a store and get to know the information of the product from its tags, and then check out at the Point of Sale (POS) with cash or cards. Consumers spend a lengthy time in lines when checking out, which was regarded as a big pain point (Lesonsky, 2017). Nowadays, the in-store payment experience is being transformed with digitized solutions, for example, consumers can check out on a self-service machine by themselves without the help of cashiers (Damen, 2021). Mobile payment methods, payments made using a mobile device, most commonly via an app on a smartphone, are being developed in a lot of countries.

In-store mobile payments in Asia, especially in China and Singapore, are already very popular among consumers (Chitrakorn, 2017). For example, people in China are able to pay with Alipay or WeChat Pay in almost every store, there are also end-to-end services based on these payment methods, such as ordering a pizza in a restaurant on the phone and the payment will be automatically completed when the pizza is delivered to the table (CGAP, 2019).

Meanwhile, in-store mobile payments in western countries have just started, and most of them are NFC such as Apple Pay and Google Pay (Alarco, 2020), which makes it hard to provide end-to- end services because NFC requires a POS terminal to complete the payment. Many companies have started to develop their own payment apps with solutions such as QR codes and relevant services to gain market share from the blue ocean. As the general adoption rate of mobile payment is still low in western countries especially Europe (Kats, 2020), it is interesting to understand the reasons behind the low adoption and find opportunities for each country to develop their localized mobile payment solutions.

Klarna was founded in 2005 in Sweden and provides smooth online financial services such as direct payments, installment plans, and post-purchase payments. Today, Klarna is one of the biggest banks in Europe, used by 90 million end customers (Klarna, 2021). Currently, Klarna is expanding into in-store payments, and looking into further development of relevant features that can be well accepted by the majority in western countries, including the United States, Australia, and several European markets. Klarna has a lot of data and knowledge in this field about the markets and consumers which can be used for research purposes.

1.2 Purpose and research questions Because of the difference in the development of in-store payment solutions in the east and west, there is an interest in understanding how in-store mobile payment has become so popular in Asia. In collaboration with Klarna, it is also highly interesting to understand the readiness of the western market to develop payment solutions that fit their consumer base. Therefore, the aim of the project is to contribute to an understanding of the development and adoption of in-store mobile payments in China as well as make an evaluation of the in-store payment readiness and possibilities of new payment methods in the west. As China’s in-store mobile payment is the biggest and most mature market in Asia (Felicitas, 2019), we will focus on studying the Chinese market.

The questions that are going to be investigated and answered are:

RQ1: What are the characteristics that made the adoption of in-store mobile payment so fast in China? RQ2: What is the readiness of in-store mobile payment in the western markets? ● What is similar to the Chinese market? ● What is different from the Chinese market? ● What is special in the western markets? RQ3: What suggestions can be developed for in-store mobile payment in the western markets with the readiness?

To reach the goal, our plan is to understand the current in-store mobile payment products features in the eastern and western markets, and then find characteristics that make in-store mobile payment in China so popular, including the ones that determine the adoption speed of in-store mobile payment methods, or the key factors that have an impact on the choice of viable payment features, and consumer’s expectations on better experience, etc. The next step is to figure out how each characteristic works in the western markets that Klarna is active in, such as their adoption rate, consumer’s expectation on different technologies, etc. After making an analysis of the similarities, differences, and things that are special, possible ideas can be discussed for Klarna to adopt in-store mobile payment in western countries.

1.3 In-store mobile payment options today This chapter is conducted to provide insights about current in-store mobile payment products as well as features in eastern and western markets and provide a research basis for further study on the characteristics that make in-store mobile payment so successful in China.

1.3.1 In-store mobile payment in Asia Alipay & WeChat Pay

According to a study by the end of 2018 (Statista, 2018), Asia Pacific has become the region with the highest usage rate of mobile payment, and China is the leader in this area (Pasquali, 2019).

Today the two dominant mobile payment systems in China are Alipay and WeChat Pay (Merchant Savvy, VUBO ltd, 2020). Alipay is a separate payment app that focuses on payment for retail, e- commerce, wholesale, and other forms of selling (Programmer, 2018), while WeChat Pay is a function integrated into WeChat, more supportive for the social aspect of e-commerce. During our research and real trials on these two apps, we found out that WeChat pay is offering similar features to Alipay, while Alipay has more unique ones than WeChat pay (Alipay, 2020).

1. QR codes During the research, we found that most of the in-store payment solutions in Asia are built on a Quick Response code (QR code), which is a type of machine-readable label that often contains data that points to a website or application (Neagu, 2021). Consumers can usually pay their bills by either scanning the merchant’s QR or have their QR scanned by merchants.

2. Basic in-store payment process There are two ways of paying in stores: ● Scanning the merchant’s QR (Scanning function) Scan the QR code which the merchant shows and enter the amount of money that you are going to pay, then authorize the payment by identification methods. This is usually the case when consumers are shopping at smaller merchants (Alipay, 2020).

● Showing consumer’s QR to the merchant (Showing function) Another way to complete the payment is to have consumers show their QR code which is connected to their personal account in Alipay or WeChat to pay merchants. In this way, payment can be completed smoothly without additional authentication with the pre- allowance from consumers (Alipay, 2020).

3. Usage Scenarios There are a lot of scenarios where Alipay and WeChat pay is applicable (Editor, 2020). To give some typical examples from personal observations of the usage, the showing function is mostly used in every large restaurant, grocery store, shopping mall, supermarket, fashion brand, hotels, etc. While the scanning function is more frequently used in smaller scenarios, such as in mom- and-pop shops, roadside stands, food stalls, etc.

There are also ways of using mobile payment on the spot while interacting with other services, for example, “Didi” with grabbing taxis, “Mobike” with renting bicycles, pay at vending machines and subways, etc. (Greco, 2020). Besides these payment functions, people are able to join the loyalty program from different merchants with Alipay and WeChat automatically (Financial IT,

2019), since they have provided the information which is required to register as a member to these payment methods. Overall speaking, mobile payment methods have permeated into almost every aspect of people’s daily life in China which used to require cash or card.

WeChat and Alipay are now being widely used in other countries, but the target consumers overseas are tourists coming from China. Still, different countries have their localized mobile payment methods.

Other payment systems Other than the Chinese market, the markets where mobile payments are more frequently used on the spot are Singapore and Thailand (Felicitas, 2019).

For smaller family businesses in Thailand, Prompt Pay, jointly developed by Vocalink and National Interbank Transaction Management and Exchange (National ITMX), which can link to almost all banks in Thailand, is seen as a symbol of the country’s modernization (Harrison, 2020). It provides services that allow consumers to make and receive payments with QR codes and is fast becoming a popular method to pay in stores.

Not far away from Thailand, in Singapore, fierce competition between different institutes is ongoing. According to a recent guide about mobile payment methods in Singapore, including some apps developed by the individual bank and platforms which are cooperating with various banks, GrabPay, FavePay, Nets, PayLah, and DASH are among the most popular local service providers (SingSaver Team, 2021). More interestingly, because of the plenty of service providers, early in 2018, the Monetary Authority of Singapore even rolled out a unified payment QR code, the Singapore Quick Response Code (SGQR), which allows every single consumer to pay through one QR code with all 27 e-payment solutions (Kit, 2018).

1.3.2 In-store mobile payment in Western countries In western countries, namely Europe, the US, and Australia, we collected a lot of payment products through online research and found out that currently, the majority of them are underdeveloped in functions and services compared to products in Asian markets.

After in-depth research on the offerings from the western markets, we roughly divided them into three different types, for the full list and description of in-store mobile payment solutions in western countries, see Appendix A

Products focused on P2P and P2B transactions.

Vipps in Norway (Vipps, 2021) and Swish in Sweden (Swish, 2021) are both payment systems that can link to every bank in the country, and the transaction can be conducted by either showing QR to the other party or scanning the others’ QR. In different countries around the world, there are a lot of similar products which focus on providing the transaction services, such as Payconiq (Bancontact, 2021) in Belgium, Bluecode (Bluecode, 2021) in Germany, Twint (Twint, 2021) in Switzerland, and Venmo (Venmo, 2021) in the US, consumers can earn extra rewards by paying with them. This type of payment solution focuses on P2P (Peer-to-Peer) and P2B (Peer-to- Business) transactions, which is the basic concept of mobile payment. Consumers are encouraged to pay with the money they have in their bank account, while the concepts of taking credits or financial plans are not developed yet.

Another P2B in-store mobile payment method is using Bluetooth Low Energy (BLE) (Borison, 2017). Companies such as PayPal have introduced this payment method in 2013 (King, 2013), but generally, there are not many products on the market that have adopted BLE.

Near-field Communication (NFC) developed by mobile ecosystems and card service suppliers. Apple Pay was developed when the trend of mobile payment was rising several years ago (Apple, 2014), and there are other mobile ecosystems and card service suppliers that compete with similar NFC payment methods, such as Google Pay (Google, 2021), Samsung Pay (Samsung, 2021) and Pay Wave (VISA, 2021) with Visa cards, etc. With those solutions, consumers can simply attach their debit or credit cards to the phone and pay by putting their cell phones somewhere near the Point of Sale (POS) terminal (Bond, 2019), in this way consumers are able to enjoy the benefits of using their cards as they used to. This type of solution often has limitations on the type of the phone and the card schemes, and they require the adoption of POS terminals and updates of systems from merchants.

Methods providing different financial plans There are payment apps that are trying to provide a smooth payment experience with optional fintech solutions for consumers. Affirm (Affirm, 2019), Afterpay (Afterpay, 2021) and Klarna (Klarna, 2021) are offering financial options such as “pay in X days” (X is equal to 4, 7, 14, etc., according to the local regulations and payment company’s local strategies) or installment plans based on amounts of money spent during purchasing and consumers’ attitude towards credits. The “pay in X days” service means that you can pay after X days of the purchase without additional interest, while with installment plans consumers are able to split their bill into several months or weeks with a clear amount for each period. Some apps are even offering an automatic withdrawal from their bank account every due date (Klarna, 2021).

1.4 Delimitations The focus of the thesis is limited to the in-store payment methods, other aspects such as online payment and in-store payment with other means than mobile will not be analyzed or part of the recommendations.

From the background study, the Chinese market was found to be the biggest and most mature market when it comes to in-store mobile payments, therefore the study will focus on the characteristics in China. This is due to the amount of available information on the subject in the Chinese market and time restrictions on the project.

The western markets that will be studied are limited to the markets that Klarna’s in-store payment solutions are currently available, will expand into in the near future and are of interest for Klarna, which was discussed with the Product Director of In-store Experience at Klarna.

2 LITERATURE STUDY

In order to determine the market and customer needs, a literature study based on mobile payment history and the qualifications to how it became popular in China has been conducted. The literature study is based on current identified payment solutions, the Chinese market behavior, and requirements for adoption in the western market.

Additionally, to understand the innovation and adoption process of new technologies better, theories are used to support and explain the identified characteristics of the Chinese market. As well as support for the suggestions for the development of in-store mobile payment in the Western markets.

2.1 Diffusion of innovation and S-curves When new innovations are introduced to the market there is a diffusion process for consumers to adopt the innovation. This process takes time, and the adoption rates differ. What are the attributes that made the adoption of in-store mobile payment so fast and the adoption rate so high in China? According to Rogers (2003), there are five attributes and product characteristics that are decisive for the adoption of innovations and the rate of adoption:

1. Relative advantage: to what extent an individual perceives the innovation as better than the existing technology. The higher the relative advantage, the faster an innovation will be adopted.

2. Compatibility: how compatible the innovation is with existing values, previous experiences, and needs of the user. The higher the compatibility, the higher the adoption rate.

3. Complexity: the difficulty to understand or use the innovation. The lower the complexity, the faster an innovation is adopted.

4. The trialability is how much an innovation can be tried and tested. New innovations are assumed to be adopted quicker if they can be tested beforehand.

5. Observability is the extent the innovation can be seen by others when using it. An innovation can diffuse faster if it is easy for individuals to perceive its positive effects.

The relative advantage and compatibility have been noted as attributes that are particularly important and influential for the adoption rate which has been proven by numerous empirical studies (Rogers, 2003).

The diffusion over time is divided into five stages of adopters: innovators, early adopters, early majority, late majority, laggards, see Figure 1.

Figure 1. The diffusion of innovation over time (Voges, 2017)

In yellow the general diffusion level is shown as an “S” shape. Related to the five stages, in the beginning, only a few individuals adopt the innovation, the innovators, then as the curve begins to rise steeply the early adopters, early majority, and late majority adopt the innovation. At the top, the curve flattens out as the laggards are the last ones to adopt. When the S-curve is close to a plateau there is an innovation window for the next innovation to be introduced, see Figure 2.

Figure 2. S-curve development (Business explained, 2021)

To jump to a new S-curve the new innovation must either adopt an already existing function and/or principle from some other area alternatively create a new function and/or principle (Souchkov, 2007). Take in-store mobile payment as an example of an innovation using the same function with a new principle, the function is “To pay in-store”, and the new principle is “Mobile-based transactions” instead of cash or plastic card. Jumping to a new S-curve is radical innovation and moving up the S-curve is incremental innovation.

2.2 Halo effect As mentioned in the diffusion of innovation, compatibility is a particularly influential attribute to the adoption rate of new innovation. The Halo effect shows this as the compatibility of the innovation with existing values and previous experiences of the user.

It is normally recognized that the Halo effect (or Spillover effect) was first proved with empirical evidence by Edward Thorndike in 1920 (Thorndike, 1920). It is defined as a ‘‘marked tendency to think of the person in general as rather good or rather inferior and to color the judgments of the specific performance dimensions by this general feeling” (Thorndike, 1920).

Since then, this effect has been tested and applied in a lot of areas. In marketing, it is used to explain the bias from consumers toward certain products because of the experience they had when using other products from the same company, for example, sexy sports cars like Ford Mustang, Subaru WRX, Porsche 911 have been made as ‘halo cars’ by each vehicle manufacturer to create

9 their special brand images for consumers, and therefore they are able to sell the other regular cars under the same brand/model with the same image (Frank, 2012). This is how a strong attitude towards a store brand or feature impacts the evaluation of all other features (Chong & Wong, 2005).

According to recent studies on in-store mobile payment, the Halo effect also occurs in the shift of different shopping stages, for example, the adoption of mobile phones in information research might have an influence on the adoption of mobile devices for proximity mobile payment (Gwarlann, et al., 2016). Kem Z.K. Zhang (2019) also found that the previous experience of a certain product can provide the basis for the subsequent evaluations of the product or other similar products. And there is a channel spillover, which means consumers tend to choose the same channel as the one they used in the last stage to reduce additional transaction costs and improve efficiency. Sonja Gensler (2012) also agrees that familiarity with a channel can improve consumers’ efficiency to perform tasks.

2.3 Characteristics from literature review Mobile payment is one of the biggest payment solutions in China today, used as the main means of payment by 92 % of the population in China’s largest cities and 47 % of the rural population as of 2018 (Daxue Consulting, 2021). The success behind mobile payment and the two most popular mobile payment applications, WeChat Pay and Alipay, can be attributed to three key factors according to Huang, et al. (2020) and Klein (2020): lack of payment services in the traditional financial industry, an environment that encourages payment innovation and rapid technological growth of internet technology.

The following literature review has been divided into different categories of subheadings where the literature is presented, including the characteristics which were found in the Chinese market that made China successful in adopting in-store mobile payment. The characteristics can be seen as a way to measure the readiness to adopt in-store mobile payment in each country. To understand how these characteristics behave, questions that are going to be asked in the later surveys were derived, which is an important part of the empirical research. To provide a more coherent reading experience, the characteristics and questions are presented together in this chapter.

2.3.1 Trust in mobile payment and Sense of security When it comes to trust in mobile payment and sense of security, Gwarlann, et al. (2016) found that after trying mobile payment customers will consider the experience rather than the risks, a change from before using mobile payment. While Fan, et al. (2018) means better understanding and awareness of security and trust are more likely to lead to a positive attitude towards mobile payment. A cross-cultural study on mobile payment between China and the USA by Zhang, et al. (2018) showed that Chinese users are less concerned about security and privacy breaches when using mobile payment compared to American users.

Trust in mobile payment is a critical factor that significantly influences the consumer intention to adopt this payment method. Consumers’ trust is strongly indicated to be shaped by vendors, services such as “delivering mobile alerts and information services to consumers in the first instance to develop channel trust; providing and communicating service guarantees and real-time customer process; reinforcing safety and security within the aesthetics and syntax of the consumer’s experience; and visibly delivering best practice payment technology elements, such as transaction identifiers and effective repudiation management” have a big influence on the perception of mobile payment according to Xin, et al. (2013).

Research also shows that with mobile wallets, the initial trust has a positive association with perceived usefulness and fulfillment of initial expectations. Living up to expectations at the first encounter and if the user thinks the technology improved the completion of the transaction is linked with initial trust. Fulfilled initial expectations of the user have a positive link to continued use (Talwar, et al., 2020).

Similarly, the initial trust in mobile banking is closely related to information quality and service quality, and peripheral cues include system quality, reputation, and structural assurance. System quality such as interface design like visual appeal and navigational structure has a great impact on the first impression (Zhou, 2012).

While mobile payment is starting to become adopted in many countries, mobile banking has been much more adopted over the past decade. Trust in mobile banking indicates trust in handling money on the mobile phone which could be a good mobile payment opportunity.

Therefore, trust in mobile payment and a sense of security play an important role in the successful adoption of (in-store) mobile payment. And as a result of the “Halo effect”, trust in mobile banking can be seen as the basis for trust in mobile payment. Therefore, the question “Please estimate how many adults use mobile banking apps (as opposed to telephone banking or banking in a physical branch or internet banking on the desktop)” was developed with the implication that high usage means corresponding high trust in the security of mobile banking.

Sense of security is also important for consumers to be willing to share personal information about themselves, which is highly relevant for developing mobile payment features. To see the differences in willingness to share personal data between markets the following question was developed: Willingness to share personal data with merchants, and Klarna respectively?

2.3.2 Price sensitivity and group influence The Chinese market shows mobile payment also has advantages for the customers besides being a fast payment method. Online shops and services that are bought online usually offer lower prices,

11 and to encourage mobile payment and returning customers there are often discounts. Savings from using mobile payment combined with it being an easy and fast payment solution gives people a major incentive to use and continue to use mobile payment (Zhang, et al., 2018). Besides, there are incentives to encourage consumers to use mobile payment in stores. For example, consumers are able to scan a special QR code in-store to get a ‘hongbao (red packet)’ with a random amount of money from payment providers such as Alipay, and therefore they can have a reduction of the same amount on their next purchase in-store with mobile payment (Dibaiquanqiutong, 2017). With this tiny incentive, millions of consumers are heading to the stores to shop with mobile payment, which indicates how sensitive Chinese consumers are to price and has contributed to the adoption of mobile payment in stores. Besides consumers, the merchants’ attitude to different payment methods are also driven by price, as suggested by Klein (2020) “Merchants were slow to adopt card readers, reluctant to either absorb the costs or pass them along to customers.”

To understand if the incentives that worked well in China could also work for western countries, a question about the price sensitivity of consumers is developed, which is “How common is it for a typical 25-year-old shopper to research, compare products and prices before buying? (ex. a pair of headphones for 100 euros)” since a 25-year-old consumer is the typical user of Klarna.

The fast growth of mobile payment in China has to a great extent been thanks to group influence as Chinese people often influence each other. The sudden growth of mobile payment originated from the launch of WeChat’s version of the “hongbao (red packet)” feature in 2014, with the tradition of giving out red packets of money during the Lunar New Year (Paulo, 2017). With this feature, consumers were able to top up their WeChat pay wallets and send each other red packets on WeChat, which simplified the process that used to involve cash. Although WeChat launched mobile payments in 2013, the introduction of red packets saw WeChat Pay's user base expand from 30 million to 100 million users in a month (Paulo, 2017). The feature became viral and according to The Wall Street Journal, the launch of sending digital red packets on WeChat Pay generated 16 million red packets during the first 24 hours (Jacobs, 2018). With social media, the influence of celebrities and social influencers has also grown massively in the past decade.

The influence of other people can be an incentive to shop and in the case of red packets, an incentive to use mobile payment. Many features are also based on influence and could be developed or adapted for the right markets. Therefore, we wanted to know “How often would a typical 25-year-old shopper be influenced by someone else in what they choose to buy (friends or social influencers)?”

2.3.3 Attitudes towards credit Historically Chinese people have had a negative attitude to traditional credit (Lin, et al., 2019), and credit cards never really took off in China, and credit card transactions are rare to this day. Statistics from The Global Economy in 2017 show only 20.82 % of the Chinese population above

12 the age of 15 has a credit card (The Global Economy, 2017). Instead, high cash usage and trust in cash could be observed. The biggest note in China is 100 RMB, which equals around 13 EUR, and makes it bothersome to handle big transactions (Klein, 2020). Since the introduction of mobile payment, a change can also be seen with Chinese millennials who are changing their attitude towards credit and debt, using credit cards and online platforms which makes it easier to shop with borrowed money (China Daily, 2016).

The adoption and usage of credit cards have been common in the west for a long time and most people are accustomed to it and trust the security. In comparison, China has developed differently in terms of payment solutions: while many other countries switched from cash to credit cards and are slowly introducing mobile payment now, China has essentially skipped a step, going from cash to mobile payment.

As there used to be a more negative attitude towards credit in China, it is interesting to understand if the attitude towards credit differs in western countries. And because of the “Halo effect”, the consumer’s attitude towards traditional credit can also have an impact on the adoption of relevant new in-store mobile payment features. Which leads to the question “What is an average 25-year- old consumer's attitude to credit?”

2.3.4 User experience The fast adoption of mobile payment in China depends to a high degree on the friendly user experience provided by mobile payment developers according to Daxue Consulting (2021), and merchants also expect a lower effort and cost to be spent on new methods (Klein, 2020). Beside these facts, ease of use has been found to influence both consumer’s purchase and post-purchase stages (Gensler, et al., 2012).

To better define the friendly user experience of mobile payment products, we selected two typical factors that play a major part in it based on the understanding of our own and the product managers at Klarna: a fast transaction, and a quick and easy authentication method. Therefore, to research on western market’s perception of ease of use, the following questions were developed: “How much time is acceptable for consumers to complete the payment in-store?”, and “Please rank the authentication methods of a financial app based on frequency” including password, face recognition, fingerprint, unlock pattern, electronic identification system owned by banks, etc.”

2.3.5. Environment The environment played a big part in the development of in-store mobile payments in China, due to an environment that encourages payment innovation and rapid technological growth of internet technology (Huang, et al., 2020). In order to establish mobile payment, the population must first

13 have mobile phones. The realization of new features also depends heavily on local regulations. As Huang et al (2020) said, the fast development of mobile payment in China owes a lot to a tolerant regulatory environment before the first report on mobile payment was published by People’s Bank of China in 2010, and a still friendly environment with around 270 licenses issued ever since then. Fintech today has relatively stricter regulations than years ago with more regulations introduced by regulatory authorities in each country trying to create a more secure but friendly environment for their citizens. To know about the local regulations, we asked “Which organizations control the regulations?”, with a possibility to dive deeper into the regulations and how easy it is to launch new features during the interviews.

2.3.6 Adoption level Another reason why mobile payment has been adopted so quickly in China is because of how fast and easy it is to use with QR codes, not only for the customers but also for sellers to set up and start receiving mobile payments. Depending on the sort of payment, sellers do not even need to buy any sort of technology like a POS terminal, all they need to do is print out a QR code (Daxue Consulting, 2021). The lack of fees and no need for a POS terminal is a huge incentive for merchants. Many small businesses take advantage of this and can integrate it with their personal accounts (Klein, 2020).

Research has found that past experiences can drive future choices (Gwarlann, et al., 2016). It determines how the new feature can be designed, if a country has low adoption of QR codes, more expense would be spent to teach consumers to use QR to pay. If the knowledge of QR does not exist, then diffusion of the new feature will be part of the process. The customers must go through the five-stage process before accepting the new innovation. Ideally, a country is familiar with the concept or has started adapting to QR codes and a new feature can be introduced.

Therefore, if we try to use QR code as the basis of one mobile payment solution, then the consumers’ familiarity and experience with using QR code are important for developing such a function.

From the deduction, we then developed the following question to know about the adoption rate of QR code: “Estimate how many people have used payment in a store which involved scanning or showing a QR”

Understanding the current in-store situation such as the availability of different payment methods and user preferences is highly relevant for development and implementation. The biggest note in China equals 13 EUR, which makes it bothersome to handle big transactions, and therefore the usage of an alternative became more urgent because of challenges with cash (Klein, 2020).

The adoption of NFC with debit/credit cards has an impact on the adoption of in-store mobile payment as there is a tendency to apply NFC technology when tapping cards on the mobile payment process, such as Apple Pay, Google Pay, Samsung Pay, and PayWave we found in the background study on existing in-store mobile payment products. In the same way, the development of new features also depends on consumers’ view toward existing in-store mobile payment methods as a result of the “Halo effect”. Attitudes and traditions about payment methods can also be observed when looking at the consumer preferences of payment compared to the methods offered in-store.

The current situation is also interesting from a theoretical point of view like diffusion of innovation, incremental and radical innovation. For example, using S-curves the Chinese market was at a maturity point before in-store mobile payments, with cash being the primary payment method. Previously credit cards and debit cards had been introduced but not established enough for the market to jump to a new S-curve as cash was still the preferred payment method. The innovation window left the Chinese market open for and in need of a new payment method when in-store mobile payment was introduced and there was a jump to a new S-curve with the same function but a new principle, to pay electronically on the mobile phone. In this case, in-store mobile payment was a radical innovation. However, in countries where NFC or some kind of mobile payment already has been adopted or introduced. Development of in-store mobile payment would then be an incremental innovation along the S-curve (Souchkov, 2007).

To summarize, the adoption rate of NFC and mobile payment can also determine whether it is easy for all consumers to accept in-store payment features because they are the basis of in-store payment and its features.

Common in-store payment methods were divided the payment methods into five categories, including one blank one which each market can fill in with special methods for their market: Cash, Card (i.e., debit, credit, NFC with card), NFC with mobile (i.e., Apple pay), Digital wallet (i.e., PayPal, Klarna), Other. Three questions related to the current payment methods were developed:

1. “Estimate how many merchants provide these payment methods?” 2. “Estimate how many consumers use the following payment methods in store?” 3. “What method would consumers like to pay with if the store is offering the following payment methods? Please rank them”

2.4 Final characteristics and questions To give a clear overview of the characteristics and questions that win-store and developed from the literature review, see Table 1.

Table 1. Overview of the final characteristics and questions for the survey

Characteristics Questions

Trust in mobile payments Please estimate how many adults use mobile banking apps (as opposed to telephone banking or banking in a physical branch or internet banking on the desktop)

Expectation of fast transactions How much time is acceptable for consumers to complete the payment in-store?

Quick and easy authentication Please rank the authentication methods of a financial app based on frequency

Willingness to share personal data If consumers are willing to share the following personal data with merchant and Klarna respectively

Low level of consumer credit What is an average 25-year-old consumer’s attitude to credit

High adoption of QR codes for Estimate how many people have used payment payment in store which involved scanning or showing a QR

Friendly development environment Which organizations control the regulations?

Price sensitive How common is it for a typical 25-year-old shopper to research, compare products and prices before buying? (ex. A pair of headphones for 100 euros/dollars)

Easily influenced by other people How often would a typical 25-year-old shopper be influenced by someone else in what they choose to buy? (Friends or social influencers)

High cash preference Estimate how many merchants that provide these payment methods in-store;

Estimate how many consumers use the following payment methods in-store;

Low adoption of NFC What method would consumers like to pay with if the store is offering the following payment methods? Please rank them;

Low availability of different payment Given methods: cash, card (credit, debit, NFC); options mobile NFC such as Apple Pay; Digital wallet

like Klarna; others (state what it is)

These characteristics are answers for our research question “What are the characteristics that make the adoption of in-store mobile payment so fast in China?”. With the derived questions, we are able to continue with our research on “What is the readiness of in-store mobile payment in western markets?” and “What suggestions can be developed in the western markets with the readiness of these characteristics?” in the following chapters.

3 METHODOLOGY

This chapter presents the methodologies used in the project. To reach the set goals, different methods were used to collect data that is needed. The research design explains how the methods were designed and structured. Data collection describes the process and parameters of collecting the data in detail. Lastly, the methods used during the data analysis are presented.

3.1 Research design From literature to characteristics Based on the literature study, a number of characteristics that played an influential factor in the adoption of in-store mobile payment in China were identified. The characteristics and the derived questions were reviewed with industrial supervisors at Klarna to determine if they had an impact and were of value for Klarna’s work. With their expertise, the final list of characteristics and questions were developed.

Survey Using the characteristics and the derived questions, the survey questions were developed. The survey can be seen as a way to measure the readiness of in-store mobile payment in different countries in comparison to China. The score on each characteristic of the countries researched can then be compared to each other to determine which countries are most ready and where different payment solutions are best suited. The countries that were researched are limited to where Klarna’s in-store business is currently active and planning to expand into in the near future. The survey questions were reviewed, and a test run on the viability was conducted together with the two industrial supervisors, after which modifications of the questions and choices were made to be more objective and valuable for Klarna. The participants were primarily given multiple-choice questions, but the survey also included yes or no questions, ranking, and open questions.

We chose to let experts in each market within Klarna answer the survey for the markets in the different countries based on two reasons. The experts are knowledgeable of their market and have a good understanding of the consumer and general population. If the survey were sent out to Klarna consumers, there was a risk of bias as Klarna’s consumer base for the most part is younger, tech- savvy, and accustomed to internet shopping, maybe even mobile payment. This would have resulted in a skewed picture of the market which would not have given a good base for the research.

Interviews As a result of some characteristics being subjective, interviews were determined to be a good compliment to surveys to better understand the reasoning and thought process behind the answers. Therefore, semi-structured interviews were conducted together with the survey for available markets, see Appendix B for the interview guide.

3.2 Data collection This chapter specifies how the data collection was performed in the research study. The study was mainly based on primary data in the form of interviews and surveys and secondary data from the literature review.

Literature review The literature review was performed to map the mobile payment situation in Asia and to understand how and why mobile payment became the most popular payment solution in China. Articles were primarily found through KTH Primo, which is the KTH library search engine, and Google Scholar using topics such as “mobile payment”, “payment solutions”, “in-store payment”, “QR payment”. For the articles that were not found on these search services, we have cross- checked the information by finding the same information on multiple sources and trials in real life, and verified them as reliable information. During the mapping of the mobile payment solutions, Google was used to find the payment solutions websites.

Survey Total 15 surveys. 12 out of 15 the surveys were filled in during interviews, which means the survey was filled in live together with the interviewee, see interview for further details. For the 3 countries where only the survey was conducted, the survey was sent out in the form of a google sheets document for the experts to fill in, see Appendix C.

Interviews For the 12 countries where interviews were conducted, the interview and survey were held together over recorded video meetings ranging from 30-60 minutes. The interviews were semi-structured, the survey questions were read out loud and interviewees answered verbally before the answer was filled in on the survey by us or by the interviewee themselves. After answering each survey question, follow-up questions would be asked from the semi-structured interview guide or regarding information from the previous answer that needed more clarification.

A full overview of interviews and surveys conducted is presented in Table 2. Interviewee B was in charge of more than one country due to these countries being grouped based on similarities and the interviewee having experience in multiple markets, and the interviewee answered for more than one market during the interview and answered for all three markets in the survey.

Table 2. List of interviews and surveys conducted Interviewee Role Country/market Data

Interviewee A Senior Product AU Interview + Survey Manager

Interviewee B Senior Product DE, AT, CH Interview + Survey Manager, Accountable Lead

Interviewee C Line Consultant DK Survey

Interviewee D Senior Commercial ES Interview + Survey Manager, Accountable Lead

Interviewee E Commercial FI Survey Director, Accountable Lead

Interviewee F Line Consultant FR Interview + Survey

Interviewee G Commercial IT Interview + Survey Manager, Accountable Lead

Interviewee H Associate Product NL Interview + Survey Manager, Accountable Lead

Interviewee I Commercial NO Survey Manager

Interviewee J Commercial PL Interview + Survey Manager

Interviewee K Product Manager, SE Interview + Survey Accountable Lead

Interviewee L Senior Product UK Interview + Survey Manager, Accountable Lead

Interviewee M Product Manager, US Interview + Survey Accountable Lead

3.3 Data analysis We started preparing for the data analysis process during the research design when developing the questionnaire and interview guide, by reflecting how each question could contribute to the thesis,

20 answer the research question, and give suggestions to Klarna. These reflections were written down as an analysis guide before the data collection started.

After finishing the data collection, the interview recordings were transcribed, and the behavior of each characteristic in each country was analyzed separately, the analysis is based on the score of each question from survey results together with the follow up questions in the interviews. This was done based on the analysis guide by comparing the data collected to the characteristics from China to gauge similarities and differences, and what is special about each market. The markets were then compared to each other to see similarities, differences, and what is special across the board. The analysis gave way for categorization of the western markets of current in-store mobile payment situations, based on similarities found. By comparing each category to the mobile payment situation in China, the readiness of each market could be determined.

The goal is not necessarily to find a market with the same prerequisites as China but to determine the possibility of mobile payment adoption and what kind of features would be suitable for each market. To find suitable development ideas, we compared the categories’ readiness, the current payment situation, and the consumers’ attitudes in relation to existing features in the west and China. A combination of characteristics and the market qualities have also been used to suggest new ideas that could be suitable for development of end to end services, smooth user experience, and features that help attract new users and improve users’ stickiness.

4 RESULTS AND ANALYSIS

The collected data is presented and analyzed by the country. The analysis includes the sub- questions from the second research question about what characteristics are similar, different, and special about the different markets, and makes conclusions on their readiness for in-store mobile payment and features around it. Quotes from the interviews are presented in Italics, while our analysis, conclusions and presentation of survey results are in Roman font. The markets are then compared to each other, with a discussion about differences and similarities. The research question can be answered after analysis and comparison of all countries, and the markets are categorized based on readiness. For the full survey answers, see Appendix C.

AU The survey shows Australian consumers have the same time expectations for an in-store payment process regardless of the amount of money, 5-10 seconds with NFC on mobile which is a very fast process, which is similar in time and effort as the Chinese market. According to Interviewee A, “The majority of people use NFC with mobile, being able to tap has become the expectation since COVID-19. What could be frustrating is to remove the mask for face recognition authentication or enter a passcode instead.” Having a fast and easy payment method is essential and has become the norm in Australia. The interview further clarified that almost everyone has debit cards, but with mobile payment solutions, the card is stored on the phone and there is no need to reach for the wallet during payments. Although almost all merchants accept cash, it is rarely used today.

The study showed that consumers are comfortable handling money on their phones and have high trust in mobile banking, which is used by almost all of the population. According to Interviewee A, “Mobile banking apps are one of the primary apps that consumers see the value of having on their phones”.

Interestingly, when it comes to authentication methods for financial apps the survey shows face recognition and fingerprint is more frequently used in Australia than password/passcode, which is the first or second most common method for all other countries. The interview further explained that the methods are popular because of their speed and the trust people have for facial recognition on the phone as well as general trust in the security of the banking app. Special for the Australian market is that some banks have introduced Voice ID. When transferring money, it is possible to authenticate by saying “You can identify me by my voice”. Consumers also trust the less popular methods, the popularity is because of preference, convenience, and different user practices. Gestures as authentication do not exist.

The Australian market shows high trust for banks, banking apps, and handling money on mobile phones. Fast authentication and transaction methods are expected. The above characteristics are similar to the Chinese market. High adoption of payment with in-store mobile and NFC, and new authentication methods also show openness to try new solutions.

Interviewee A explains that “consumers are hesitant to use credit card products because they have seen it cause financial stress in the older generation, and therefore dislike traditional credit card products. There is a perception that if you own a credit product or your credit report is touched by too many credit brands it would impact your ability to borrow, and therefore your ability to buy a property, which is a lifelong goal for many. It is something that people are more scared of than they should be, they are sort of uneducated about what the actual impact of it is on their lending ability. They are open to the “Buy now, pay later” concept, as an alternative, Australia has two very established brands, and people have been using them for about 7 years.” Similar to China there is a low level of credit and hesitation towards traditional credit products.

Interviewee A explains “Personal data willingly shared with a merchant includes a full name, date of birth but not the year, and phone number, although they are conscious of it becoming spam.” Which is part of the personal data shared with Klarna: the full name, address, date of birth, email, and phone number. The year of the date of birth is also shared because that’s how Klarna identifies people in Australia. “Generally, people are more willing to share personal data with a company that is using it for a purpose rather than just acquiring the information they do not need, such as a merchant because the date of birth is not necessary to complete a purchase.” Although consumers are less willing to share personal data that they do not think is necessary for a purchase, sharing the necessary data to use a service or function is not a problem. The text number, equivalent to the social security number in Australia, is quite confidential and is not shared, it is not necessary for identification at merchant or Klarna.

QR code scored low on the survey and Interviewee A means “In-store payment with QR codes today are still not used by many people, but it is an option at checkout in some stores. However, QR codes, in general, are very common in Australia to scan and use to check in at locations, which is mandatory. Compared to before COVID-19 not many consumers had used QR codes.As there’s very little manual effort with it, the majority of people are comfortable using QR codes and they trust the safety of QR codes.” Although not many payments are done through QR codes, the consumers are familiar and comfortable using QR. Introducing QR solutions would not require much teaching consumers how to use the function.

Regulations around payments are strict and in Australia SF (Statutory Fund) and APRA (Australian Prudential Regulation Authority) are the regulatory bodies. Interviewee A continues “At the moment, Klarna’s product is called unregulated credit, so it is not currently regulated but they are looking into ways to regulate it and watching pretty closely in terms of how it is working. If a product falls into the regulated credit side, it is more challenging to roll out a new feature or payment solution if it is unregulated credit, it is relatively easy.” What is special for the Australian market is that Klarna’s product currently falls under unregulated credit, which is a friendly environment for development opportunities.

The interview revealed it is common for consumers to research, compare products and prices before buying, most of the time people would do light research. According to Interviewee A “Young people are more inclined to do more research and are happy to use the internet to find the best deal. Consumers in the 18-30 age group, gen Z and some millennials, are also often influenced in their shopping habits. The elderly would be more inclined to go to a brand they trust, such as David Jones which is one of the largest department stores in Australia and purchase there because they always have.” Same as the Chinese market, consumers in Australia are sensitive to price, young people are not very brand loyal and are influenced in their shopping habits. This suggests that incentives would work well in the Australian market for the target demographic of Klarna.

Interviewee A explains “That not so many consumers use cash, Australia is very close to being a cashless society. Almost all would use a card instead, and the majority of people would use NFC on mobile” The limit to NFC payment was removed when cash became scarce during COVID-19 and companies moved to tapping with NFC. In terms of the entire population digital wallets are not used by many people and are less popular than cash, but for the target group of Klarna, probably half would buy using “Buy now, pay later”, Interviewee A explains “basically no one in Klarnas target market is using cash.”

Almost all characteristics are the same as China and Australia paint a very similar picture to the Chinese market today, rather than before the introduction of in-store mobile payment. Much is due to Australia already adopting in-store mobile payment, using a solution that is different from QR codes. The characteristics which were not similar are a result of this. Low adoption of NFC is not fulfilled due to the established in-store mobile payment solution based on NFC. Australian market does not show high cash preference due to establishing in-store mobile payment, which is the same as the Chinese market today. Although it does not show the low availability of different payment methods, the preference shows very clearly that primarily cards and NFC are used.

DE/AT/CH For the adoption rate of mobile banking apps, Interviewee B explains that “Most people have some exposure to mobile banking, but only half of them are exclusive users such as interacting with their bank, while the others are using it for authentication because of the PSD2. It is interesting that although a lot of people are using it, most of them are still more willing to manage their banks online, not with phones. Therefore, about half the population is recognized as the conclusive users of mobile banking in Germany. The same goes for CH, while almost all the people in AT have used mobile banking.”

Although in DE and CH, a lot of people are using mobile banking, the usage of doing transactions is not much, so the trust in the security of mobile banking in DE and CH is at an average level, which is different from China. However, almost all the people in AT trust it, which is similar to what is observed in the Chinese market, and it indicates a higher trust in handling money on mobile phones and a good mobile payment opportunity in AT.

Interviewee B explained that “Consumers are quite used to paying with cash, which is usually slow because it takes time to count the money and exchange for consumers and merchants to make sure the amount is correct.” Therefore, Germany has a much higher tolerance on the time they spend on payment. “The same goes for AT and CH because they are also using cash to a large extent, even though AT is a bit more digital. Therefore, usually the expectation for doing transactions in-store will be no more than a minute. But if the consumers are going to have a financing plan in-store, then the expectation will be much longer because the traditional way is to fill up paperwork besides a separate desk.” Interviewee B continues. Based on the expectations of consumers, consumers from DE, AT, and CH would expect from 30 seconds to 1 minute to buy a cup of coffee at Starbucks, from 1 minute and even longer to buy 100 euro of clothes from H&M, and a MacBook at Apple shop.

The expected time to complete the payment in these three scenarios is much longer than what Chinese consumers expect, it is due to the fact that the consumers in DE, AT and CH have a higher tolerance because of the high cash usage, which is special for these three markets. Another interesting fact is that their tolerance can be even higher on purchases with a higher amount of money because the traditional way of applying for a financing plan takes a lot of time. Conclusions are that overall, there is a high tolerance on one of the aspects regarding ease of use, and it makes the adoption of a bit more complicated payment method possible.

To rank the authentication methods, Interviewee B says “unlock patterns are not generally accepted by the financial apps, the prior choices are passwords, fingerprint, and face recognition respectively. There is no electronic identification system owned by banks like BankID in Sweden, but there is an SMS OTP (short messages with one-time password) for two-factor authentication which means you have authenticated with other methods for once, and then you also need to type

26 in the passcode from the short message as a secondary verification. The answers for AT and CH are the same for Germany.”

As Interviewee B perceived, “the German citizens have been used to the traditional way of authentication, which is extremely cumbersome, such as TAN transaction list and 6-digit pin, so the consumers’ tolerance with the complexity of authentication methods is usually high. For example, it is not acceptable to send a signed document through email and have that be valid in the court in Germany since there is no proof of delivery. The only way to work with this is the fax machine because with which consumers can get a printed receipt of delivery, and that is why the fax machine is still widely used in Germany. While the older people do not trust technology, the younger people do trust these new concepts like biometrics.” And Interviewee B believes that the shift of generation is happening.

Compared to China, the preference for authentication methods is different in DE, AT, and CH. This might be due to the difference in people's general attitude towards new technology, and people in Germany have a higher sense of security such as the example of the fax machine indicates. Therefore, the quick and easy authentication we found from the Chinese market might not be easily accepted in DE, AT, and CH markets. With the shift in generations, we believe that in the far future there could be a chance for adopting faster authentication methods, but the current authentication methods with lower speed and more complexity are acceptable for the citizens since they have been used to a much more cumbersome way of doing it.

Regarding personal data, Interviewee B shared a starting point that “generally Germans’ benchmarks for sharing their personal data are quite high. For example, there was a person who wanted to participate in an event, but he was still unwilling to share his email address to sign up for it with the establishment that he had visited many times because he regarded the email address as personal data he did not want to share. But they are willing to share the data if they are given a persuasive reason, such as to fill in the name and address for delivery, to give their phone number to know if their new couch is coming so that they are able to open the door and to provide their date of birth for buying alcohol, etc.” In general, they are willing to share their full name, and the request for sharing their date of birth and phone number can be met only if they see the need.

Another interesting fact is that they will never share their social security number. Instead, they have tax-IDs and tax numbers, but with merchants, they will never share their personal tax-ID either.

To use the payment solution of Klarna, consumers are required to provide their full name, date of birth, and phone number, and they are generally willing to share these data since there are explanations in the flow. Interviewee B says “It is similar for AT and CH, while AT is more inclined to share the date of birth and phone number.”

Overall, the willingness to share their personal data is a bit low for consumers in DE, AT, and CH, which means that they generally have a higher sense of security than consumers in China.

It is also interesting to see German consumers’ attitude towards credit. According to Interviewee B “the credit card debt in Germany is zero because Germany’s concept of credit cards is entirely different from other countries. They have credit cards, but the money will be automatically drawn from their tied bank account after 30 days of purchase with no added interest, which is different from the popular credit mode that the card owners usually carry debt over to the following few months and pay additional interest. And consumers will not be able to use their credit cards anymore if there is no money in the tied bank account.” The low maturity of credit in Germany owes a lot not only to historical reasons, but also culture that they do not like credit or debt.

With the regard that credit is not popular in Germany, the acceptance of credit cards in stores like restaurants are quite low, instead, the acceptance of debit cards is much higher, and cash is the most popular payment method. While AT and CH have a slightly higher affinity with credit cards, even if the CH has the same concept of credit cards as other places, the adoptions in these two countries are still much lower than the other markets. Therefore, the three countries are of a lower level of consumer credit, and people do not like to revolve in debt or pay extra interest, which is similar to what is observed in the Chinese market and provides a possibility to develop products that do not contain the concept of the traditional credit.

When we look at the adoption of QR codes, it is also a lower rate either in using it to pay in a store or to sign up for a loyalty program. The consumers in Germany used to have plastic or paper cards as their membership cards until 3-4 years ago when they started using QR codes. As Interviewee B says “For example, the consumers can use the QR code to acquire their loyalty points, and these points can be exchanged into currency so that they are able to get a corresponding reduction on their purchase. Despite the low adoption, almost everyone understands what QR code is and the concept of scanning it to open the webpage to pay.” Interviewee B also suggested that “using a QR code to make a payment could work for younger people, but it is still a bit complicated for other generations to understand.” He also mentioned there is a new trend to use NFC (tapping your phone) to pay, it started about a year ago due to COVID. If we look at the entire population, there is barely anyone in DE, AT, and CH who has used payment in a store that involved scanning or showing a QR.

The low adoption rate of QR codes in these three countries indicates that the conditions for developing a traditional QR based payment system (the one that is widely used in Asian countries) have not been fulfilled. But as Interviewee B suggested, using QR codes in other steps of the payment process could be more acceptable for people in DE, AT, and CH.

The organizations that are controlling the regulations in Germany, AT, and CH differ. “What is generally regulated are transactions and such, not the payment, but introducing a new economic concept like giving credit at the point of purchase will be very complex.” Besides the feasibility of developing a new feature from the regulations' aspect, Interviewee B also provided his view from the consumers’ and merchants’ sides. According to him, “there are costs to learn new things and adopt new devices or apps, therefore, the more things that consumers and merchants need to learn or adopt, the more difficult for a new payment solution to be rolled out.”

As we perceive, the development of new payment solutions will not be too difficult from the regulations’ perspectives if there is no new financial concept being introduced. It is hard to say if the environment for developing financial products is similar or not to the Chinese market, but we can tell that the most difficult part for the DE, AT and CH market is to teach both the consumers and the merchants to accept and use the technology.

When we talked about the consumers’ sensitivity about price, for example, to buy a pair of new headphones which cost 100 euros, Interviewee B says “most people would do some research and try to get the best deal, while people would never spend their time researching throw-away electronics, cheap wire headsets, etc. Overall, consumers would sometimes compare products and prices before buying, but as we interpreted, the shopper at the age of 25 years old would do it more often since their income is lower compared to the older generations. And people would also be influenced by their friends and social influencers in what they choose to buy most of the time.” The sensitivity for price and the high group influence is similar to China, which means the conditions to create such an environment are fulfilled in DE, AT, and CH.

When talking about the payment methods that are provided by merchants, cash is always available anywhere, card and mobile NFC can be seen in the majority of the stores, while digital wallets like Klarna are barely observed. “Another common method is an invoice, especially for hardware stores and mom-and-pop shops (small, family-owned, or independent businesses) where you will get an alignment of credit with the store and a monthly bill will be sent to you for everything that you picked up. Every shop has its own solution, so it is not standardized.” Says Interviewee B, “There is a slight difference between AT and CH in that there are more stores where digital wallets are available, but still not so many, and cards in CH are accepted by almost all merchants.”

With the different offering rates of payment methods, almost all the consumers have used cash to pay, and the majority of them have used cards. Not so many have used NFC like Apple pay and Google Pay in Germany, the situation is slightly different for AT and CH consumers as around half of the population have used it. Compared to those payments, digital wallets and invoices are barely used in either DE, AT, or CH.

From the consumers’ perspective, the majority of them are so used to paying with cash, so cash also becomes their most preferred method in Germany, cards are the second choice. Interviewee B adds “But because the acceptance of cards is a bit higher for both consumers and merchants in AT and CH, it is regarded as the first choice for consumers in AT and CH, while cash is the second. If a user has a credit card or likes to use a card, the preferred payment method will be credit cards, then the next preferred method will be NFC because it requires the consumer to activate the NFC functionality on their phone and add their credit card to their digital wallet, and most people who did that would be willing to pay with NFC because it is more convenient, but not so many would do that if we look into the whole market. Therefore, the next preferred one is NFC like Apple Pay and Google Pay, and then digital wallet and invoice in sequential order for these three countries. Almost anyone that offers card payment today accepts NFC, but the adoption rate of NFC is lower because most consumers have not attached their cards to their phones. There are several reasons behind this, for example, people do not understand how it works or the convenience or they feel like using cards and pins is already easy enough, and it could probably be that they are not so interested in new technologies.”

“There is no day-to-day limit on NFC payments with mobile phones, but there is generally a limit of 25 euros to tap on cards. With the work of a fraud prevention mechanism, it is requested most of the time to insert the card and check the chip, or to enter the pin code. It is different because in order to tap with phones you need to use either fingerprint or pin code to unlock the screen, but it is easier to fraud with cards” Says Interviewee B.

While the Germans do not like cash in general, especially the younger generation is frustrated by it, they are used to cash because they hardly have another option. For example, some younger people use cash because most of their income is tips, or they have a cash-based allowance from their parents. Historically cash is preferred by merchants because there will be extra cost to offer payment methods other than cash. Such as an example from Interviewee B implies, “An IKEA which opened 5 years ago does not accept payment methods other than cash because it is cheaper for them to handle cash. But with the new policy to charge merchants a transaction fee when there is an imbalance between cash in and out, more merchants are going to provide other payment methods to achieve the balance and reduce the overall cost.”

The high usage of cash both on merchant’s and consumers’ sides usually indicates that there are not a lot of other payment options available, which is exactly the fact. But, interestingly, one of the main reasons for merchants to choose cash as the prior method is because they can reduce the cost and achieve a higher income by using cash. Although the situation is being changed slowly through efforts from the introduction of new products by globalization and new policies that encourage a balance in cash-in-and-out by banks, the usage of cash has been rooted in German consumers for a long time. Although the high cash usage in DE, AT, and CH is similar to China, the reasons behind are different.

Most people are used to paying with cards, but the majority of the usage is debit cards, not credit cards, which is similar to what happened in China before the adoption of mobile payment. While the adoption of mobile NFC is quite low in China, we observed a higher rate in these three countries, which is different.

ES The survey shows half to the majority of the adult population using mobile banking, according to Interviewee D “Users primarily check the balance and transactions as well as make bank transfers. Some people, not all, check finances to see how they are doing. There is also an application called Bizum, which is integrated with the online bank, that is used to send money peer to peer to your friends or family.” Mobile banking apps are used the same compared to other countries but there’s slightly lower usage and habit of handling money on mobile in Spain. As the number is still above half, the characteristic is considered satisfied. The difference comes mainly from the generation gap, where older people might not be as used to handling money on mobile phones.

For the payment time, Interviewee D goes through the steps and explains “You take your wallet from your pocket, you take your card, you tap, wait for the receipt. [...] The difference is when the product is very cheap, people just want to tap the card and walk away as soon as possible. They might not even wait for a receipt to be printed, they just want to get the coffee and go. However, if it is €100 at H&M that is a significant purchase and want to make sure everything went okay and keep the receipt. So, there is more commitment to the transaction.” The expectations in all scenarios are longer than the expectation of payment in the Chinese market. However, from the interview when making smaller purchases, the Spanish consumers want to spend less time on payment and finish as soon as possible, this tells us that they would prefer a faster payment process as Chinese consumers do.

The authentication methods depend on what kind of phone the consumer owns but all of them offer passcode by default. Then fingerprint second, face recognition third most common. No gestures or BankID. SMS OTP, that is also something that a lot of banks use, but not for login, but more for payments. People trust the authentication methods. “For someone who has used all of the authentication methods would typically prefer fingerprint or face recognition, but older people that are not so versed in technology will use their passcode because that is the one, they feel more comfortable with.” The authentication methods are standard and in line with the Chinese market, fast authentication methods are expected, and biometric authentication is preferred by younger generations.

The survey found willingness to share all listed personal data points with merchants and Klarna. The most complicated one would be the social security number, but Interviewee D means “If it is required by the merchant or by Klarna then people will share it anyway.” Spanish consumers share the same personal data with merchants and with Klarna, there are no problems shared if required. This is similar to the Chinese market, and Spain and Sweden are very open with personal data compared to other western markets.

Spanish consumers are not very used to consumer credit according to the survey. “The average 25-year-old does not have money as it is quite rare to have a job at that age. If their parents trust

32 them, they will have a debit card. It is very rare to see someone 25 years old with a credit card. The general sentiment is a lack of trust in the banks. The previous financial crisis of 2005, which hit Spain hard, with a high unemployment rate and a lot of people struggled. Many banks had to be rescued by the government but afterward continued doing a lot of bad things, which resulted in people not trusting the banks a lot.” Interviewee D explains.

Compared to traditional credit, new concepts like the ones Klarna are offering are perceived very differently by consumers. They do not see it as a credit, they see it more as a smart way to split the purchases. The difference comes from the fact that it can be used with a debit card, which is seen as one of the transactions. Therefore, this is found to be convenient and increase the purchasing power. Interviewee D continues. “Klarna, or any other pay later options, are not associated with banks, instead seen as a service that the merchant is offering or a cool company that is offering this benefit.”

Spain mainly uses debit cards and consumer credit is rare and is not used very much in Spain, especially not by young people. The lack of trust for banks contributes to this. A low level of consumer credit is satisfied and similar to the Chinese market. New concepts like pay later have been received with openness from the consumers, as they can be used with debit cards.

According to Interviewee D, “Barely anyone has used QR codes for payment, so it is very rare. But now it is used in restaurants to see the menu”. Ordering and payment are still done to the waiter and with a card. Consumers feel like it is okay to scan QR and there are no worries about safety. Although QR codes are not used for payments in Spain, the consumers are comfortable and familiar with scanning QR codes for other purposes. Like some other countries, this is an opportunity for further development.

The regulatory bodies are the Bank of Spain, which is the Public Bank. When advertising, it must show the APR that is charged, for promotion of installments (APR is annual percentage rate is the annual rate charged for borrowing or earned through an investment). Interviewee D has not found it very difficult to roll out new payment solutions and says Spain is more or less in line with other European markets, like Germany or France, or Italy.

The survey answers show most of the time consumers would research and compare prices before buying. People are very price-sensitive in Spain. Very often influenced by friends and social influencers. This is consistent with other markets consumers are price sensitive and influenced in their shopping habits and satisfy the characteristics of the Chinese market.

The interview revealed that cash is accepted everywhere while acceptance of cards is different in the city and rural areas. In big cities like Madrid, almost all merchants accept card payments, but

33 in a small town in the middle of Spain, it is about half to the majority of the merchants. POS all support NFC, which makes it the same as a card, everywhere that card is accepted, NFC also is.

The survey shows about half of the consumers would use cash and on average the majority or almost all would use a card, while the majority would use NFC. As mentioned before there is a difference between cities and rural areas. NFC is a very integrated payment method and is used both with a card and on mobile, more and more with the phone. Here the difference can be observed between younger generations who prefer mobile and older generations who would use NFC with a card. The limit for NFC is €50, which was changed during COVID-19 from €20.

“More modern [tech-savvy] consumers do not like cash because it is a hassle to carry with you. But some people like it because they feel like they are more anonymous when they pay with cash. Nobody can track what they spend and so on. Younger people rarely carry cash, but the generation of my parents always carry cash with them.” Which could be a generational thing according to Interviewee D.

Cash usage is decreasing and the preferred payment method in bigger cities in Spain is NFC, with card and mobile, which means the integration of NFC and mobile payment is very high. In the countryside, there are fewer POS terminals available, and cash is more present. The rural environment is very similar to the Chinese market before mobile payment, and Scanning QR to pay was integrated without the need for POS. Cash preference is also separated by generations as young people rarely even carry cash at all.

One of the reasons why cash was preferred before according to Interviewee D is because “Banks used to charge merchants a lot for accepting cards. Many consumers felt like they were not supporting the local business when paying with cards because the merchant would get paid less, so people used to prefer to pay with cash more. This has changed as there are more fair merchant fees now.”

The differences in payment methods in big cities and the countryside are found. Because of this difference, the average use of mobile banking apps being lower can also be rationalized due to this fact. Cards are still the most used payment method, partly due to a limit on NFC and the preference of different generations.

FR According to the survey, about half the population or the majority use mobile banking apps. The interview further specified “French consumers use mobile banking to check their accounts and transactions, make transfers/payments for rent, etc., and to check the investment portfolio if they have it in the app.” French consumers do a lot of errands on their mobile banking apps and show trust in handling money on their mobile devices. This suggests that it will be easier to adopt mobile payments in the future and satisfy the characteristic “trust in mobile payment”.

Interviewee F means that the acceptable time to complete a payment comes down to the frequency of the purchase and the merchant. “Buying a cup of coffee once or twice every day means the payment needs to be fast otherwise the consumer and store would lose a huge amount of time, 5 seconds. Generally, people would not buy €100 of clothing every day so it could be acceptable to take a little bit more time, however, H&M is fast fashion so it should not take more than 30 seconds. For the Apple shop, buying a computer maybe once every two years so it is fine if this takes more than one minute to make sure about the invoice, etc.” For the actual time it takes to complete the payment, the first two would use cards or NFC, which takes the same amount of time while buying with an invoice will take slightly longer.

While the payment time is relative to the frequency of the purchase, the actual time for the payment process is the same, if a coffee only takes 5 seconds, so does the clothes. So, there is a difference observed between acceptable time and expected time. As buying with an invoice is different in that more details need to be filled in, it is also understandable that it would take longer. For general payments, the characteristic can be considered similar to the Chinese market with fast payment.

When it comes to authentication methods the survey shows password/pin code is most common, then face recognition and fingerprint, which depends on the set up (phone) of the consumer. Sometimes SMS or email OTP is required. Interviewee F says “French consumers are used to putting the pin code when using a card and use pin code anyway, so it is not an issue (or inconvenient) to tap a password/code.” French consumers do not find inconvenience in passwords, even though there are “easier” methods using biometrics.

People in France are super skeptical when it comes to trust and security. Interviewee F explains “No one will ever say I trust this company 100%. For example, I have worked in tech companies, and I don’t trust it 100%. I trust it as much as old fashion companies and even trust it more, but never 100% for any company or institution”. People will be skeptical in France about anything. Skeptical does not mean not adopting the technology. For example, French consumers like iPhones, but might not trust them 100%. Consumers do not know the truth and exact workings of Facebook and phones, but everyone has read stories or experienced something that hints at the fact that we are being spied on by the device.

Interviewee F continues “People are skeptical, but they are not stupid. If they see the upside, they will do it, keeping in mind that nothing is 100% secure so for example, Apple Pay is super popular and adopted. People understand that there is a risk but maybe this risk is not higher with Apple Pay than a regular card. And the time you save with Apple Pay is maybe worth the risk of paying with Apple. So, people are not as tech-savvy as in Asia, but I would say like 4 out of 5.”

Despite Interviewee F underlining French consumers being skeptical, they also show openness to accept new technology. As mentioned above, if consumers see the usefulness outweigh the doubts and the security/risk is considered similar to other methods, French consumers are happy to adopt new technology.

The survey shows French consumers are quite open with sharing personal data, except for the social security number. There are no problems sharing a phone number because it is given all the time, for example, to get an alert for a package after a placed order, and they are also willing to share the full name and date of birth. During the interview the unwillingness to share the social security number was also addressed, “the social security number is never given because no one would ever ask for it except for the government or health insurance, so it is never given to anyone.” The same data is shared with Klarna. A Social Security number is not necessary to identify a person, it is done with the date of birth, place of birth, and last name.

Willingness to share personal data is similar to the Chinese market as all the necessary information is shared with no bigger remarks, the social security number is not needed for anything related to banking/payments therefore it is not seen as a necessary part of the sharing of personal data.

According to Interviewee F, “25-year-old consumers are not super used to credit on a daily basis, and are skeptical by default towards credit, always looking at the fine print to see if there are any extra charges. French consumers in general are not used to credit. France generally does not have credit cards; it is mainly debit cards. This means usually consumers spend what they have, so “Pay in three” (Klarna) and other installment plans have a bad image in France. It is associated with working-class people who cannot afford a big purchase that is unexpected and therefore have to resort to expensive credit.”

There is quite a negative attitude towards credit in France, similar to China. As such, consumers are not very familiar with consumer credit and spend what they have, which fulfills the characteristic low level of consumer credit. Klarna has introduced new concepts in the market such as “Pay in three” which by default has a bad image as it is associated with credit, and Klarna being very young in the market could be a disadvantage. But as a result of France being a very new market, the market acceptance and attitude cannot be fully observed yet.

According to Interviewee F, “Barely anyone or not so many have used QR to pay. But since COVID-19 every restaurant now has QR codes on the table instead of the menu. So really similar to China but in China usually payment is also done on the phone in the end, whereas in France right now it is not an end-to-end experience as customers would browse the menu on the device via the QR but order either at the bar or to the waitress that comes to the table and same for payment. Except for some high-tech places where they want to push to QR, but it is the first step, and it is not widespread.” For the safety and trust of QR, usually, when French consumers go to the bar or to order, they just want to order the drinks and would not argue if QR is the only option so people would not even wonder if it were safe or not, because it is the establishment’s responsibility to ensure that it is safe. QR code as payment is not integrated into the French market, but due to COVID-19 QR codes have had high adoption in restaurants and bars. This is a common feature of QR in China, and also includes ordering and paying using the QR code on the table. This first step in France is great for possibilities of further adoption. And although consumers are not used to paying with QR they are familiar with scanning QR.

From experience dealing with the local law, it is a lengthy process to get the local branch approved according to Interviewee F. The survey revealed the majority of French consumers research, compare prices, and are influenced in their shopping. All ages are easily influenced and Interviewee F says “The word of mouth is super strong. You would trust someone you know more than any commercial or advertisement. Anyone would be sensitive to their surroundings.” French consumers are brand loyal to some extent depending on the type of product. Similar to the Chinese market, French consumers of all ages can be observed to be easily influenced, these incentives could contribute to the use of mobile payment if French consumers see the usefulness in it.

The survey shows availability at merchants is for the most part cash, card, and NFC according to the survey. However, consumers show low cash usage and mainly use debit cards. It is very common with NFC, but digital wallets are not used a lot for now.

Interviewee F explains “Cash usage in France is not very high and many people prefer cards. The switch from cash to card came during the ’80s where the government made strong actions to enforce safe card terminals in all shops. Although French people are super skeptical, they trust the government to some extent or at least consider the government will protect them. In addition, with the introduction of the euro currency early in 2000 there are more and more bill types, and because of the high amount’s bills can be rejected by shops. It is hard to pay with a bill that is more than €100 compared to Germany and Belgium which are super cash heavy. So, in France when paying with a bill of €100 or more the shop is a bit uneasy because they need to check if it is a real bill or not. People prefer a card because it is a bit more secure, similarly in China, there are a lot of fake bills, so it is good to have mobile payment because there is no risk of receiving a fake bill.”

However, the interview also revealed a lot of shops today only accept card payments above €10 or €15. For payments below €10-15, about half the shops offer card payments from €1, and the other half only accept cash, which means cash is still very present in France. This is because the merchant fee with card payments in low amounts is becoming too expensive to accept.

Cash is still present because merchants enforce it on lower amounts, but consumers show low cash preference according to Interviewee F, “French consumers dislike cash due to the inconvenience of needing to count and carry the cash, which is heavy if you have many coins. A sign of how few people in France carry cash is that this year the red cross is accepting donations on the streets with a card terminal because people usually do not carry cash they can donate.” People don’t carry cash and use this as an excuse to not give money, but Interviewee F thinks the red cross this year has disrupted the whole process to get more funding. NFC is for amounts below €50, which is likely to increase, and NFC integrated into 95% of the POS terminals. But France shows low adoption of mobile payment solutions, and no method is dominating the market at the moment.

French consumers criticize new technology, but if they see the usefulness consumers are open to adopting new technology. In the French market, introducing in-store mobile payment would depend on merchants and merchant fees, as French consumers already show dislike to cash which suggests that they are willing to adopt new solutions that would be more useful.

Similar to China, a few markets including France are scanning QR codes at restaurants to see the menu, which results in high adoption of QR but not for payment as this is currently not an end-to- end experience.

IT In Interviewee G’s point of view, about half of the population are using mobile banking apps. People use it for a lot of things, such as doing transactions and checking the balance, the basic functions. Banks are offering new features like setting a monthly allowance, paying contactless, but they are not commonly used in Italy.

The adoption of banking apps is moderate in Italy, and there are even more new forms of banks and banking app functionalities. These trusts in the security of mobile banking apps also suggest that it will not be hard for people in Italy to develop trust in other mobile payment methods in the future, which is similar to China to some extent.

Interviewee G thinks the time spent on purchase does not depend on the things that consumers are buying, it more likely depends on the usual methods that consumers are using. Therefore, in all these three scenarios, the paying action will barely take 5-15 seconds with a card. But in H&M, people would use their points, so the actual time spent at the POS will be 30 seconds to 1 minute. And people would be much more patient and would usually apply for a financial plan while spending a large amount of money such as buying a MacBook, televisions, and cars, then the expectation will reach more than one minute.

Although the time spent on these three scenarios differs, it is mainly because people would expect actions other than payment integrated at the POS. But we can still see a slight difference in their attitude towards purchases with different amounts of money, which means they will behave more patiently when spending a higher amount of money. This situation is similar to China where people generally expect their time spent on POS to be short, and more time is acceptable to be spent on applying for financing plans.

“The authentication method that is used by each person depends a lot on the phone that he/she has. Therefore, the passcode will be the first choice because every phone is offering it. And then the fingerprint will rank higher than face recognition because there are more Android system- based phones in Italy. The unlock pattern is not common. And there is a two-step SMS OTP as the other countries do, but it is more of a request from the banks” Says interviewee G. passcode is ranked as the most commonly used authentication method, but there are a lot of people who are using biometrics to verify themselves. It indicates a high trust in biometrics and high expectations of having quick and easy authentication, which is similar to China.

Interviewee G thinks that “To share personal data with merchants, consumers will usually say YES to their full name, date of birth, and phone number, while they are not so willing to share the social security number.” Whereas for Klarna, they are willing to share all those things. He continues, “The social security number is not secret in Italy because it can be deducted with knowing the first name, last name, date, and place of birth.” Other information that needs to be

39 provided to the merchant is the address, which is also required by Klarna to verify their identity. Italians are not rejective about sharing their private data. And the data that is required to provide to Klarna can cover the ones that are needed to create a loyalty program, which is also similar.

Traditional financing in Italy usually takes a lot of time, and people think it is slow and old. As “Buy now, pay later” is not so common in Italy, it is difficult to tell people’s attitude towards it, but the higher-than-expected attitude towards “Pay in three” can be observed from data analysis on people’s usage of this service with Samsung.

People in Italy hold a negative attitude towards traditional credit because it is slow and old, and it is interesting to see from consumers’ real reaction to Klarna’s product that the new concept of credit has been well accepted by the target group, which is similar to China and shows the promotion of more new credit products could be possible.

The QR code has not been adopted a lot in in-store payment in Italy, except for payment methods such as Satispay. “About 1.3 million people are using it to buy things in stores and online. It is so popular because the shoppers can earn some cashback, and merchants are charged lower transaction fees compared to cards, and they can even use it for free with transactions under a certain amount, besides a POS terminal does not necessarily need to be installed” Interviewee G says. Overall speaking, the usage of QR codes can be around half the population. And there are a lot of other use cases of QR code, such as scanning it and having a look at the menu of a restaurant.

The adoption rate of QR codes in Italy is high, and it has been adopted in either payment process or other scenarios. Thanks to the development of Satispay, people have been so familiar with paying with QR codes and it makes the adoption of more QR based products in Italy possible. And the story of Satispay also tells us that “using incentives to attract both consumers and merchants” works. And since they are sometimes influenced by others about what to buy, it is possible to promote Klarna with incentives and group influences, as proved by the Chinese ‘Red pocket’ effect.

The Bank of Italy is controlling the regulations of developing new payment methods in Italy, and there have been other rules on advertisements and so on. The difficulty to roll out a new payment depends on what kind of things a company wants to do. The reaction from the Bank of Italy is usually slow, interview G says “so there was a case when a payment company created something out of the guidelines, but it took a long time for the Bank of Italy to notice it and abandon it.” Normally it takes as long as six months to roll a new payment concept, but it will be much shorter if the company has acquired regulatory capabilities licenses from other countries.

It will not take too long for Klarna to develop a product in Italy that exists in other countries, whereas developing new concepts can be time-consuming because of the slow reaction of the

40 authorities. Therefore, slightly different from China, the environment for developing something new might not be friendly in Italy, but it is open to moving solutions between trusted countries.

People in Italy generally compare prices most of the time, while a typical 25-year-old shopper would do that almost all the time. For example, “a lot of people would buy things from Amazon directly, but they still compare and check the prices of alternatives because a free delivery can always be reached through Amazon Prime. Even though the purchases are conducted on one website, people are still doing the action of comparing” says Interviewee G. While people are a bit loyal to Amazon, they will also have a look at the other websites when they are doing purchases such as buying a laptop and mobile phones.

The possibility of being influenced by others is a bit complicated. As Interviewee G says, “For example, people are always being influenced by TV if they are watching TV”, but they would sometimes be influenced by their friends or family.

It is interesting to see Italian’s style of brand loyalty to Amazon. Different from ‘I will buy things from this brand whatever’, it is more likely because they can enjoy free delivery and find almost everything at a good price on this website, but they will turn to other merchants when there is a much better bargain.

Cash can be used everywhere. “Cards and NFC are available in almost every store in big cities such as Milan, while it is hard to find a POS machine even in a clothes shop in small cities.” Digital wallets like Satispay can be seen in about half of the merchants. And there are food vouchers, which are very common in supermarkets and restaurants. Regarding the people who use these payment methods respectively, we got the same answer as above. While talking about the consumers’ preference, NFC is ranked first, followed by card, cash, and digital wallet in sequence.

Almost everyone in Italy has a card, and most of them would find it easier to pay with the mobile NFC because they have almost everything on their phone, such as personal documents, cards, etc. And as Interviewee G says “it is the fastest and easiest method compared to all the others. The limit that people can pay with mobile NFC is the same as the limit that they have on their card. And people do not need to enter their pin code to complete the payment because the verification action has been done at the instance, they use their face ID or fingerprint, which also makes their card much safer. The pin code should be provided with a purchase that is more than 25 euros, which is a bit low.”

Satispay has a lot of use cases. This product was founded and developed in a small city in Italy in 2014. With the founders’ strong network with the local people and merchants, together with the security of their product, the founders developed the product there successfully and then spread it to other places like Milan where people are more technology savvy. And to motivate people to use

41 it, they offered merchants money and consumers cashback. “It is more commonly seen in bars, restaurants, and so on where lower amounts of transactions are conducted” says Interviewee G. From the merchants’ side, lower amounts usually bring lower and even zero fees; whereas, for consumers, they also expect to pay lower amounts because there is a monthly allowance set by themselves in the App, and with that limit, it will be hard for them to pay something expensive.

When describing the payment functions, Interviewee G says “Consumers are able to pay with Satispay by either scanning the QR of the merchant’s account or searching the shop inside the app and then entering the amount of money, the process is a bit more complicated than cards or NFC. The merchants can know from their mobile phones if they have received the payment.”

It is interesting to see the variation in the availability of cards and NFC in different regions, and the development and use cases of Satispay. These phenomena show relatively high adoption of NFC, lower cash preference, and high accessibility of different payment options. Satispay is successful because it takes advantage of people’s sensitivity to benefit and group influence especially among smaller merchants. But as Satispay attracts a lot of people, mobile NFCs and cards are still dominant in the market because these two payment methods are faster and easier to use. And Italy is a country where consumers have a lot of in-store payment methods to choose from.

NL Almost everyone in the Netherlands uses mobile banking as far as Interviewee H knows, “like my mom who is 75 years old uses mobile banking apps.” So, the majority of the penetration is using these apps in the Netherlands, it is very high. People usually use it to have an overview of their balance and their payment. As iDEAL is the most popular online payment method that always requires consumers to use a mobile bank app, that’s also what people use it for. “And there is a concept of Tikkie which is a p2p payment service that is very popular in the Netherlands, for example, if three friends had food together, then one of them will pay, and that person would split the payment and send the other two people a Tikkie so that they can pay with iDEAL with every bank in the Netherland.” And unlike other countries, there are only around 7 banks in the Netherlands.

The adoption of banking apps is quite high in the Netherlands, even a 75-year-old consumer is using those apps. And since there have been apps like Tikkie and iDEAL, which indicates that generally people in the Netherlands trust the security of banking apps, it suggests that it will also be easier for them to adopt a trust in other mobile payments in the future, which is similar to what China used to be.

Consumer’s expectations on time spent on the first and the second scenarios have no significant difference and are short as they both are a matter of using plastic cards or digital cards with mobiles. In the Netherlands, everyone has a plastic card, different from credit or debit card, it merely deducts funds from a bank account. Interviewee H says “So, in all three scenarios, usually paying should not take more than 10 seconds.” But in the last situation, when buying something expensive like a MacBook, people will not use their regular form of payment and they would be willing to spend more with financing plans, which takes time. Interviewee H has used financing a few years ago to buy a MacBook, in those cases, the consumers are usually able to apply for a financing plan at the POS. “The process of applying for credit/financing might take between 1-20 minutes, depending on how modern and smooth their solution is. So, buying a cup of coffee and buying clothes at H&M will take 5 seconds, and the last one is one minute and over.

The acceptable time spent on payment is generally short because of the high adoption of their special ‘plastic card’. Although the answer for buying a MacBook at an Apple shop is more than 1 minute, it is because the process of choosing financing plans is integrated, but their expectation on the actual time spent on the action of paying is the same as the other two scenarios. Therefore, we can say that the people in the Netherlands generally have an expectation of about 5 seconds to complete the transactions, which is as fast as the Chinese do.

Regarding the authentication methods, Interviewee H says “The latest iOS system has face recognition, but it might not be offered by financial apps. Therefore, the passcode is still the most common one, then face recognition and fingerprint are second depending on the phone.

Fingerprints are more because more people have Android phones. The SMS OTP makes sense because it is sometimes triggered by financial apps, and there are a lot of banks doing that. I have never seen any electronic identification system owned by banks. Unlock patterns are more of the android system UI thing, so it is not even used for financial apps.”

The people in the Netherlands do trust biometric authentication methods and they also enjoy using them because these methods are easy to use, both fast and easy. “And the passcode could leak if someone else looks at his phone while someone types it in, or even they might steal the phone and look at the traces on the screen”, so, Interviewee H personally thinks biometrics are mostly trusted and preferred.

Although passcode is ranked as the most commonly used authentication method, there are a lot of people that are using biometrics to verify themselves, and they think it is fast and easy to use. Biometrics are even more trusted than passcode because there is less opportunity for the information to leak if the phone is stolen or being used by others. Therefore, the expectation of having quick and easy authentication is similar to China.

The data that consumers are willing to share with merchants and Klarna are generally the same. “People are willing to share the full name for sure, date of birth is not common, and people might not be super happy to share it, but they will share when required and the reason is clarified”, and Interviewee H says he will personally enter a fake one if it is required but he does not see the need to provide it. Interviewee H continues “Social security number is a very big NO. Social security number in the Netherlands is more like a citizen number that people would never share, and some people think of it as a very secret thing, and they will never be asked for it unless they are dealing with the government. When you are going to sign up for a new bank account, the bank might write down the passport number instead of the social security number.” In the Netherlands, people are usually identified with a passport number or the ID number, or driver’s license. Whereas the name and phone number are sorts of standard and people are willing to share them. But to use the services from Klarna, consumers need to provide their date of birth to check if they are underage to provide credit.

To verify a person, the required information is the name, date of birth, phone number, and registered billing address. But currently, Klarna does not offer online financing in the Netherlands, Interviewee H says “what Klarna is providing is short term financing and non-regulated financing, but they offer the ability to convert the ‘pay later’ to financing in the app and consumers will be asked tons of questions, because in NL it is very complicated to provide credit. The questions can be “How much is your salary”, “What is your rent”, “How many people do you have to feed”, “What is your current address”, “What is your previous address”, etc.” Signing up for financing in NL is not popular, and people are required to provide a lot of details, and it could be the reason why financing is not a thing in the Netherlands. He adds “And those that do sign up for financing

44 are more of a subprime demographic because it proves that they really need it since they are willing to go through all those complex steps.”

The Dutch are more conscious about their private data. They generally would like to share the full name and phone number, and date of birth if they see the need. While a social security number is not a thing that people are usually willing to share, instead, what they usually use to verify a person is a registered billing address. People in the Netherlands are more controversial in sharing their personal data, but usually, the information that they are requested to provide to Klarna can be used to create a loyalty account for merchants, which is similar to China.

Credit is also a funny thing in the Netherlands. A 25-year-old will have a better attitude towards credit than a 35 or 40-year-old “because traditionally credit in NL is somehow really considered an ugly thing.” says Interviewee H, “It is changing and Klarna is part of that change with “Buy now pay later”. Even though it is not a regulated credit in the eyes of the financial authority, the consumers might still feel like it is because you get the goods now, but you do not have to pay for it.” The average 25-year-old has a negative attitude towards traditional credit, but it is okay to use “Buy now, pay later”.

The people hold a negative attitude towards traditional credit, while they are more open to the new concept of credit like the “Buy now, pay later” that Klarna is offering, which is similar to what Chinese people used to be and makes introducing new concepts possible.

Barely anyone in the Netherlands has used QR codes. This is interesting because the COVID pandemic has introduced some more use cases. But still, QR codes are very few seen in the Netherlands when compared to China or other Asian markets. Interviewee H regards himself as a big fan of the QR codes, but in his daily life, it is rare to see or use them, “and some people see it as old technology because QR codes have existed for so long, but no one uses them, which drives the idea that they are not useful. And since no one uses it, there is no use case for it, therefore there is no good understanding of how they work.” The late update of the operating system of Android can be a reason, because there was no standard photo app installed in the phone with which consumers were able to scan the QR code a few years ago, instead, they needed to download a separate app to scan the QR codes. But the people in the Netherlands are digitally savvy, and they are happy to accept new technology. Such as the example from Interviewee H “When looking at the contactless payment, it took like only about a year and everybody was using it everywhere, which went really fast.”

The adoption rate of QR codes in the Netherlands is low, and it is regarded as sort of an outdated technology because it was developed several years ago but there were rare use cases nor no easy method (for example a standard app built in the operating system) to scan the QR code. But as the Dutch are more tech-savvy, therefore, with the introduction of use cases of QR codes, it would not

45 be too hard to teach consumers to use it. So, the characteristic ‘high adoption of QR codes for payment’ is different from China, but it could be adopted more as more use cases are introduced in the future.

“In the Netherlands, for example, to advertise financing with a big poster on a bus stop, saying like ‘you can buy this car for only X euros per month’, then there always will be a banner that says, ‘borrowing money costs money’, it is a hard requirement from the relevant financial authority department. And there is a drawing of a person, who is dragging a ball with a chain, and the ball is a big euro sign.” Interviewee H explains, that is how negative Dutch people are towards credit.

The rollout of new payment methods in the Netherlands depends much on the local financial authorities, and there are some regulations on advertising financing products. Hard to tell if it is easy to roll out, but from the regulations on advertising, we can still see that they hold a rigorous attitude towards credit and financing. Therefore, it is hard to say if the overall development of payment methods is easy, but the regulation on advertising is strict.

Most of the time people are price sensitive. Interviewee H says“And the Dutch are sort of known to be very sensitive to price, even compared to Germany, there are a lot of discounts such as ‘buy 1 get 1 free’ in all kinds of shops, they are also known for ‘window shopping but don’t buy’.” So compared to any other European markets, the Dutch are very price-conscious and will do a lot of searches, and there are many websites that do price comparison. Therefore, the Dutch are above average concerned with getting the best deal.

Because of the time that people are living in, people are influenced all the time by everyone. Interviewee H uses himself as an example, he is 38 years old and will be influenced by others about what to buy most of the time.

The Dutch are generally quite price sensitive, and they are known for it, and they are easily influenced by other people regardless of generations. So, the characteristics ‘price sensitive’ and ‘Easily influenced by other people’ are similar to China.

The majority of the stores are offering Cash, but there are many stores, for example, the supermarket and bakery that Interviewee H always shops in do not accept cash, and it was even so before the COVID. And definitely, there are more and more places that do not accept cash. Credit cards do exist, but it is not commonly accepted, which is also annoying for tourists because it makes it hard to pay, and the supermarket he mentioned also does not accept credit cards. But if we look at all types of cards, it is available almost everywhere because everyone can pay with a plastic card.

NFC with mobile is also universally accepted in the Netherlands, while digital wallets are barely seen.

Regarding the usage, there is barely anyone who carries cash. About half of the population use cards and the other half use NFC. Similarly, when talking about preference, a card is the most preferred, NFC with mobile is ranked as the second choice, and cash is the least preferred.

“Cash is on its way out”, says Interviewee H, “People who use cash might be paid in cash or they just belong to the small group that somehow has the preference. There is a saying that Germans like cash because it is very anonymous so it cannot be traced. But this sentiment does not live in the Netherlands. People think cash is inconvenient and it is an old way to pay with cash.”

Plastic cards could be more useful when a phone was dropped in the water or it is out of battery, consumers are still able to pay with a card. And people might sometimes leave their card at home, that is when the NFC with a mobile phone is more favorable. banks would always keep providing cards. For example, the newer banks are using BUNQ, one of those near banks where consumers can easily open a bank account, but consumers have to pay extra to get a card.

Some stores in the Netherlands do not accept cash anymore, instead, what is universally accepted is the card (credit card not included) and mobile NFC, even before the COVID. Most people think cash is not convenient compared to card and mobile NFC, and it is an old way of paying. The major issue with mobile NFC is that mobile phones could more possibly be broken or run out of electricity, but the advantage is that people are more likely to remember to bring a mobile phone with them when getting out. It is special for the Netherlands that the adoption of NFC is quite high, and high availability on cards and NFC, they have a lower preference on cash.

PL The majority of the Polish population is using mobile banking apps for managing their bank accounts, doing transactions and verifications, etc. For example, there is BLIK which serves as a Polish Swish but is available for more P2B payments, and a lot of banking apps will reward their customers for downloading the applications.

The adoption of banking apps is high in Poland, and BLIK can be seen as a typical outcome of this phenomenon. Similar to China, it indicates that generally people in Poland trust the security of mobile banking apps, and it can be perceived as a high trust in mobile payment in the future.

Cards, Apple Pay, and BLIK are very popular in Poland. Because people usually use those methods to pay, the expected time for completing a transaction would be 20 seconds. Interviewee J says “But buying a MacBook from an Apple shop could take a bit longer as people would sometimes look for financing options for such a large amount of purchase and it will be up to 10 minutes.” Even though the expected time on buying a MacBook is 10 minutes with financing, people would still expect the normal payment action to be fast as they are used to smooth payment methods like card and NFC. This situation is similar to China where people generally expect their time spent on POS to be short.

Regarding authentication methods, Interviewee J thinks “As passcodes can be used on any device, it is the most common authentication method. The next preferred are unlock pattern and fingerprint respectively because there are a lot of people using Android phones in Poland. Face recognition will be the fourth since there are not as many iPhones as Android phones. Electronic identification systems owned by banks can also be observed, but it is mostly used to verify a person’s identity, such as log in to government sites, so it is ranked as the last choice for authentication for banks. SMS OTP is another popular choice, and the users of SMS OTP would be even more than passcode has.”

These authentication methods are trusted mostly by younger generations, and they are the target group of Klarna. But the COVID has changed people’s way of shopping, nowadays more people tend to shop online rather than in-store and it develops more trust in mobile banking permanently. Such as Interviewee J said about a person’s experience in Poland, “He used to have the situation of dealing with a lot of parcels only during Christmas time. But now it's like always”.

Passcode and SMS OTP are the most commonly used authentication methods, and the ranks for fingerprint and face recognition are low. But there are also a lot of people who are using biometrics to verify themselves. It indicates a high trust in biometrics and having quick and easy authentication, which is similar to China.

People usually share their full name, date of birth, and email address with merchants to create a membership, and they are also willing to share their phone number. To use the services from Klarna, people will be required to provide their full name, date of birth, phone number, and PESEL. And there are a lot of other numbers such as ID number, tax number, social security number, etc., but they are not required to use Klarna’s services or either create a membership. The Polish people are open about sharing their private data. And the data that is required to provide to Klarna can cover the ones that are needed to create a loyalty program, which is similar to China.

As Poland is more of a cash and online transaction country, people usually do not have credit cards and there is a negative connection to credit. The online banking system in Poland is very modern as Interviewee J described, and people usually use an automatic bank transfer method or BLIK.

Interviewee J thinks that “Klarna’s services are not recognized as a permanent credit, it is a kind of financing option and there is no contract to be signed, and it is also free of charge.” Cash on delivery is quite popular in Poland because people are afraid to pay upfront, and they want to decide whether to leave it or not after they receive it. Klarna’s “Buy now, pay later” and installment plans meet this kind of need.

Polish citizens hold a negative attitude towards traditional and permanent credit. And it is special for the Poland market that the people traditionally have a preference for “cash on delivery”, which is similar to what Klarna is going to offer. Therefore, we believe that people would probably develop a positive attitude towards the new credit services after they are launched.

The majority of the population in Poland have used QR codes and they know exactly what it is, but unlike Alipay and WeChat pay, QR code in Poland is usually used as a method of login to a webpage. Therefore, not so many of them have paid with a QR code and it will take some time for people to do that.

The adoption rate of QR codes in Poland is high and people are familiar with it. But different from China, as Interviewee J said, it will take some time to teach consumers to pay through QR because most of the use cases nowadays are not payment relevant.

The National Financial Authority is controlling the regulations in Poland. As Interviewee J perceives, “To launch a new product in Poland takes time, while it is much easier to take the products from a regulated company in other countries like Sweden.”

The environment of developing existing products from trusted countries in Poland is friendly, while the rollout of new products will take time, it is hard to say if the overall environment is friendly.

People in all age groups are comparing prices all the time, and there are several websites where consumers can compare prices. Interviewee J mentioned that “Most people in Poland are not as rich as people in Sweden or Germany, so they are more sensitive to prices, and it is why people are in favor of Ali Express where things are cheaper. The younger generation is also influenced by others most of the time when they are looking for some fashion trends, while they are independent when they are buying things for daily life.”

Polish people generally have higher sensitivity about the price because their average wealth level is lower, and younger generations are easily influenced by others, so it is possible to promote Klarna with incentives and group influences, as proved by the Chinese ‘Red pocket’ effect.

Almost all the stores are offering cash. “The majority offer card payment, but smaller boutiques that sell clothes or vegetables do not provide it because of tax reasons” says Interviewee J. As NFC is integrated into the POS terminal, the majority of the merchants are providing NFC as well. Poland’s technology is more up to date than other countries because the technologies are introduced later, for example, BLIK, a general function integrated into mobile banking apps. “It can generate codes and help people to do transactions by typing the code in stores”, Interviewee J adds, “It is different from a traditional digital wallet and about half of the population are using it. People in Poland also find it easy to use BLIK with phones when they forget to bring their wallets with them.”

Majority of the people, around 70 percent of them, use cards to pay. Only half use cash, and the use rate of mobile NFC and digital wallets (other than BLIK) is lower. The limit on the payment amount of NFC can be adjusted by oneself in the application, and the standard allowance is 1000 zloty (Polish currency, which equals 224 euros). Interviewee J figures out that “The share of cash is getting smaller, but it is still being used a lot because the small boutiques do not have POS terminals, and the retired people usually get their pensions as cash from the post office.”

Regarding people’s preferences, cards will be most preferred, and BLIK is their second choice, followed by mobile NFC and other digital wallets. The popularity of BLIK cannot be separated from the Polish Bank Association’s efforts to protect the Polish market with local solutions by promoting BLIK before Apple Pay entered the market. And it proves to work well.

The availability of different payment options is high in Poland because the technologies introduced in Poland are usually the latest. The ‘boutique phenomenon’ is special and it has a big impact on the adoption of payment methods by merchants as well as people’s preference for different methods. Although cash is available almost everywhere, people still prefer to use cards more than cash except in those boutiques where only cash is available. It is interesting and special that the Polish authorities pushed the adoption of their local mobile payment function BLIK to protect their local payment market, which resulted in low adoption of mobile NFC. But with later research on

BLIK, we find out that Apple Pay is regarded to be easier to use than BLIK, and more and more Polish people who have an iPhone are willing to use Apple Pay (Targeto, 2019).

SE, and NO/FI/DK survey only Around 40%-50% of all e-commerce is done through Klarna in Sweden and almost every adult has shopped or interacted with Klarna in some way. The survey shows about half to the majority of the population uses mobile banking apps, often in combination with online banking on desktop. And acceptable times for the payment process, Interviewee K estimates a coffee is 15-30 seconds, while the clothes and MacBook are a minute or more for most people. Almost everyone uses cards as a primary payment method in Sweden. For smaller amounts, it is fast to tap your card but for bigger purchases, there is a limit on NFC for around 200-400 SEK depending on the bank, which requires you to insert the card into the POS terminal and authenticate with a passcode, which takes more time.

Due to the current established payment method, using NFC with cards, fast payments are expected for smaller purchases. Other than that, Swedish consumers are not expecting extremely fast transactions and there is a lot of time difference between the current solution and possible in-store mobile payment solutions.

Interviewee K explains “The authentication method for financing apps in Sweden is dominated by BankID as most banking apps use this authentication method, as well as health and governmental services. Pretty much everyone in the eligible population has BankID because you get it with your bank account and it is an LOA4 (Level 4 of assurance), which is almost like signing a document. Banking apps tend to use that one because it is the most secure and they do not have to maintain it.” The survey shows passcode as the second most frequently used. Fingerprint is a very common authentication method on eligible smartphone devices, and more people have access to it compared to face recognition.

BankID on the phone is a separate app which during authentication needs to be opened, signed, and then returned to the original app or website. BankID is still authenticated with a passcode, face recognition or fingerprint. It provides extra steps with a higher effort like opening another app during the payment process which has the potential to become smoother, if the security Swedish consumers can accept other authentication methods. BankID and how it works is quite special for Sweden and leaves development opportunities.

According to Interviewee K Sweden is probably the country where people are most willing to share personal data, “One of the main reasons is because most of this information is part of the public domain, which means that the information is accessible to everyone, which is very unique for Sweden. Personal data like full name, date of birth, phone number, etc. are all accessible and the tax office could give details about income, and even criminal records can be obtained.” There is a high willingness to share personal data with both merchants and Klarna. Consumers are comfortable with giving out personal data similarly to the Chinese market.

The survey shows QR is not very common and not so many people have used it as a payment method in-store. It is available in convenience stores like Pressbyrån, 7/11, and some smaller merchants without POS terminals are using the Swish app, where you scan the QR and get the person you are sending the money to, put in the amount, and confirm. However, Interviewee K means “It would be quicker to pick out the card and tap it (NFC) if a POS terminal is available”. Generally, consumers know it is a QR code but are unsure what to use it for.

Part of the population has encountered/used mobile payment with QR. Swish is a popular app used mostly for peer-to-peer transactions, either using a phone number or QR code, and it works the same way when paying a merchant. Many consumers in Sweden are familiar with this concept. Smaller, independent merchants that offer Swish often do not have POS, which is why Swish is a good choice for them. However, the research found that swish takes a merchant fee for each transaction, that is very high for small purchases which makes merchants unwilling to use Swish. But there are no alternatives and most people do not carry cash, so they do not have a choice. In conclusion, there is a need for a payment method without POS terminals for smaller merchants.

When it comes to consumer credit, Interviewee K says “Swedish consumers see the benefits but also are wary of the risks of taking on credit and have a neutral attitude towards it in general. There are fewer people using credit cards today than 15 years ago; some have replaced them with Klarna’s features, such as invoice and “Buy now, pay later”.” Swedish consumers have a neutral attitude towards credit according to the survey, which can also be seen in the statistics where 44.98% of the population had credit cards (The Global Economy, 2017). As credit is declining, features not related to traditional credit are better suited.

Regulations depend on what kind of product is offered. FI (Financial supervisory authority) regulates who can or not give out credit. Interviewee K explains “In Sweden when Klarna wanted to integrate swish or release a new financing product it is typically quite clear and transparent, you just have to read the law book and get approval from the financial authority, and everything is done formally. If I rate it on a global level from 1=hard to 5=easy, it is probably a 4. Interviewee K deems it easier to roll out a compliant payment product in Sweden than it is in probably most places in the world.” Generally, the regulatory environment is friendly, based on previous experiences it has been clear, and introducing new features that are not a completely new concept is deemed to not be very difficult.

Most of the time people would research and compare products and prices before making a bigger purchase according to the survey and Interviewee K explains that there are many popular comparison sites in Sweden, where people look at for example electronics and compare between stores. It is very common, and consumers are not very loyal to the individual store. Discounts motivate people to buy more, such as phenomena like Black Friday which was not the case 5-10 years ago and has recently become a trend. People have become more price-sensitive partly

53 because of the marketing that has become a hype. People think they are getting a good deal and more value when you buy it at a discount. However, it has happened that stores hike the price before sales, which they actually can get fined for today.

Like the Chinese market, Swedish consumers are sensitive to price, people are generally not brand loyal and are often influenced in their shopping habits. Interviewee K continues “People 15 to 40- year-olds are quite often influenced by friends and what is on the internet. When you look at groups of friends in Sweden. Most of them tend to wear the same things, buy at the same stores, have the same bag or brand of bag. There are also a ton of influencers that are making a lot of money. So that money must come from somewhere and it must be the traffic they are generating to these offers they have.” Price sensitivity and influence can be used as incentives for consumers to adopt in- store mobile payment in Sweden.

Cash is not a common payment method in Sweden, almost everyone would prefer cards. NFC is getting integrated into POS terminals and about half of them support NFC. Most commonly people will tap their card, not many people have linked their debit/credit cards to their phone. Mobile payment is most common in small stores by independent owners or businesses or convenience stores, with NFC or Swish. “Because almost all payments are done with cards, there is worry about losing the card since getting a new one takes a few days, and you risk being unable to pay. Many places have stopped accepting cash because of safety, like less risk of robbery, and additional costs in handling money such as the need to pick up, send it, convert it.” Therefore, cards are very important in Sweden according to Interviewee K

“There is not that much cash out in circulation anymore and you are safer walking around with a card than with cash. If you lose your card, you can call your bank in five minutes and tell them to lock the funds. So, people are safer, and it has become the norm to not deal with cash anymore. However, there is quite a lot of legacy, cards are a physical token that substitutes for cash.” Interviewee K believes that over time people will move to digital wallets or mobile payments more and more. The younger generation always has their phones, having payment options integrated into the phone is convenient and you can carry one less item. But in terms of the whole population, if cards are not an available option, the elderly would prefer cash more than younger people.

Low cash preference, low adoption of mobile payment, and high adoption of NFC with cards are the opposite of the characteristics in China. Consumers are comfortable sending money with e.g., Swish and handling banking errands on mobile which also indicates trust in mobile payments. Based on the interview, consumers want to make the process more and more convenient, hence why no one uses cash anymore. There are improvements that could be done in terms of timesaving during payments for faster transactions. Speed and the inconveniences of a card like bringing it and the risk of losing it, could be solved with mobile payment. Low adoption of NFC on mobile

54 and few consumers have connected cards to mobile, which means there is no established solution on the market yet.

Although many characteristics were not fulfilled, Sweden still presents an interesting market for in-store mobile payment because of the many development possibilities and openness of the consumers that want more convenient solutions. The Swedish market has a low availability of different payment solutions since everything is card-focused, and cash is becoming scarce. They also showed a need for payment without POS, which could be a QR solution. Klarna is also a very established company in Sweden. Since no established in-store mobile payment solution is currently dominating the market, but people have a slight introduction through mobile payment and QR through Swish and using NFC with cards, it is a good opportunity to become the leader in in-store mobile payment.

NO, FI, DK survey

These three countries were survey-based only, and they have a lot of similarities with SE, such as their answers on mobile banking, expectation of payment times, and authentication methods like bank-owned separate apps. NO, FI and DK are also open with personal data but more hesitant about giving out social security numbers (personal number) than SE. DK is similar to SE in attitude to credit, it is not widely used. Younger generations in FI and almost all adults in NO are used to credit but are also averse to revolving. The adoption rate of payment methods that involve QR codes in the lower end with scores 1-3 out of 5, however, NO is more familiar with it. Social influence and price sensitivity are very similar in all Scandinavian countries with high scores. Cash is rare in all Scandinavian countries. NO, FI and DK have similar payment method habits with the high adoption of cards and NFC on mobile. Based on the initial in-store payment product research, the Nordic countries have and primarily use their local mobile payment solutions respectively. Additional research showed that Sweden and Denmark use mobile payment more than Norway and Finland and in the Nordic countries Mobilepay in Denmark is used in-store the most. (YouGov, 2019)

UK The survey shows the majority of the population in the UK uses mobile banking apps; the online banking penetration has reached 76%. Differences in estimated payment in-store for the situations are because for coffee, consumers would expect it to be simple; Clothes should also be seconds for returning customers since there is a lot of people waiting behind them; for electronics, one minute, more validations, affordability assessment, verification for a larger amount and longer spread period.

Interviewee L explains “the payment should be simple for both coffee and clothes, especially if you are a returning customer.” This suggests that using the same payment method would take the same amount of time even for different scenarios. This expectation is similar to the Chinese consumers and satisfies the characteristics. For electronics for a significantly larger amount, there might be financing plans where the assessment, validation, and verification would take longer.

The interview found many authentication methods that are special for the UK market such as Onfido, Challenge questions, card scheme authentication. For purchases and logging into Klarna, there will be OTP every time to verify your identity. The most frequently used authentication methods recorded in the survey are password/passcode, face recognition, and fingerprint.vThe common authentication methods are the same as the Chinese market and use very fast and easy authentication. The special methods for the UK are more complex and using OTP every log in shows weight on security.

Consumers are generally willing to share personal data with Klarna, if it is required consumers will share it, with the exception of Facebook which is not required anymore. When it comes to merchants there is a little bit more hesitation but still very open if the information is required. According to Interviewee L, “Personal data disclosed with Klarna, part of due diligence, include full name, date of birth, billing address, mobile number. Date of birth is required to ensure that the person is an adult, and to match the profile and know about the credit. Without a date of birth, it is very difficult to verify the customer's details. Loyalty programs usually ask for full name, address, email address, mobile number. The social security number would not be given, and the date of birth only if required.” From experience, consumers are not willing to share their profile information on Facebook in order to help their purchase go through. Consumers were afraid that Klarna might post to their timeline, which Klarna did not but consumers thought it might, as such they would come out of the flow then and not complete their purchase.

Interviewee L says “Consumers in the UK are very used to credit, and many people have multiple credit cards. There is a changing attitude in younger adults.” Different from China there is a high level of consumer credit, but the changing attitude can be seen with Klarna’s demography being

57 younger and consumers choosing to use new concepts instead of traditional credit. This trend can be seen across many markets and the concept of pay later is changing the way people shop.

QR is becoming more and more present in the UK. When seeing a QR code consumers know what it is and it is not surprising to see it, compared to some time ago, where many did not know what it was. Currently, QR is most common in three places: restaurant chains to order and pay, fashion stores with banners in-store can scan a QR and check out, and at the opticians, consumers can see the eligibility to split the cost (installments plan) before buying glasses. Interviewee L thinks QR needs to be a part of an integrated point, instead of just QR and sending SMS. It needs to be there at the point of purchase to drive consumers to use it more frequently.

Although paying with a QR code is still not one of the more common payment methods in the UK, consumers are familiar with QR codes. Like Interviewee L suggested, integrating QR codes in features that are available at the register can increase the use and growth of QR.

Due to the changes going on and the UK being a heavily regulated space the environment is not the friendliest.“In terms of launching a new payment product in the market, the UK is a heavily regulated space. Because of the amount of change going on in the regulatory bodies at the moment, it can be tricky to launch new payment products” according to Interviewee L. When introducing pay later no other player was offering that type of service, so they had to make sure this was regulated, and also educate merchants and consumers. But as mobile payment is not introducing new concepts to the market there should not be difficulties in this area.

It is very common and easy for consumers to research, compare products and find the cheapest price before buying. Interviewee L explains it’s “Easy to be influenced by friends, it is kind of where Klarna is trying to tap into the mindset of social shopping. A lot of Klarna’s features are geared towards social features, being able to share content with friends and items that excite them.”

Merchants mainly provide card payment and use of NFC on mobile like apple pay, google pay. Since the start of COVID-19, some POS has started to become cashless. Cash is less and less common during shopping so it is natural to not carry a wallet because there is no need to carry cash or a card. Interviewee L adds “Consumers would primarily use in-store mobile payment. The usage of mobile payment has skyrocketed during COVID-19, and no one goes to the store without their phone these days. The only reason to bring a wallet is if there is a need to bring an ID, like going to the pub. NFC is more common than using the chip, as a consumer NFC is expected.”

When it comes to problems with the payment methods the NFC limit is brought up. “There is a limit to NFC of around 45 pounds per tap in the UK, the contactless limit is an issue like if I do my grocery shopping, I can only spend up to 45 pounds. I would not say it is something that worries

58 people, but it is a conscious decision that you can only spend up to that value, you need to be mindful of what you are purchasing.”

High adoption of in-store mobile payments combined with the high penetration of mobile banking shows that British consumers are very comfortable handling money and making transactions on their mobile devices. There's high adoption of NFC and many chose not to carry wallets anymore. But due to the NFC limit, it is not possible to rely solely on mobile payment at the moment.

The UK has already shown that in-store mobile payment is well received in the market, skyrocketed because of COVID-19, but held back by NFC limitations. Familiarity with mobile payment, QR codes, and growing pay later market due to changing views of traditional credit is setting the market up for many development possibilities.

US Interviewee M explains that almost all the people under a certain age are using mobile banking apps, the adults above the age do not use mobile apps so much. “Those apps are being used for doing transactions, checking balances, and there are budgeting apps like Mint where consumers can connect to different bank accounts to get all of their financing and budgeting in one place.” says Interviewee M. So overall, the majority of the population has used mobile banking apps exclusively.

The usage of mobile banking can be perceived as high in the US, it can also be perceived as a high trust which is similar to consumers’ attitude to financing on Alipay and WeChat Pay in China. This indicates a good mobile payment opportunity for online and in-store payment.

The survey shows the expectation of time spent on the payment in-store in three scenarios is 5 seconds on a cup of coffee, less than 1 minute on buying $100 clothes from H&M, and over one minute on getting a MacBook at Apple shop. Interviewee M explains “they are different because the amounts of money that consumers are spending are different. Usually, consumers would expect the time to spend on grabbing a cup of coffee to be super quick, but buying something more expensive like a computer from Apple, usually, there are other questions that come along with the payment process, such as extending the guarantees or offering you financing at the POS, so it is acceptable for someone to hear about those offers and take a bit longer time when buying something more expensive.”

The difference in the expectation of the three scenarios is that dealing with guarantees and financing plans is usually integrated into the payment process in-store when paying a large amount of money. But we can observe from their expectation of time spent on grabbing a cup of coffee that the US users would prefer a faster payment process as Chinese consumers do.

Password, fingerprint, and face recognition are regarded as the most frequently used, second frequently used and the least frequently used verification methods respectively. While unlock patterns and products like BankID are not so commonly seen. Besides all the authentication methods provided in the survey, there is OTP with either phone calls or short messages as the second step especially when consumers are on a device that is not remembered by the company. Considering the usual practice and convenience, a password is the most usual method, while fingerprint and face recognition are trusted as well as they are easy to use because consumers do not have to remember anything to verify themselves, but currently they are not as adopted as passwords.

Unlike the Chinese market where unlock patterns are commonly observed and the adoption rates of face recognition and fingerprint are as high as passwords, the US market is a little bit more averse to unlock patterns. The high usage of passwords is due to the usual practice, and there is a

60 universal trust in biometrics, which indicates chances for Klarna to use biometrics as the authentication method in the US.

Regarding sharing personal information, consumers are generally willing to share their full name, date of birth, and phone number with merchants and Klarna. But it is not a usual practice to share their whole social security number for a purchase at a POS, instead, to share the last four digits is acceptable. And for Klarna, the last four digits are enough to create an account and provide pay later and installment service when consumers are shopping within the app or making a purchase through a merchant’s website. But to conduct a credit check or to sign up for a bank account, when consumers go into thinking about the financial aspect rather than just a POS, they are willing to provide their full security number.

The attitude towards sharing personal information is open in the US, which is similar to China. The data that consumers are willing to share with Klarna can cover the ones that are used to sign for a loyalty program.

Interviewee M thinks “Consumers are familiar with credit in the US, and they understand what credit is. But there is an attitude against traditional credit in the US now for somebody who is around 25 years old, and more consumers today are more willing to use debit and only spend what is available in their account rather than buying things on credit in fear of revolving and paying extra interest.”

Interviewee M also adds that“Therefore, “Buy now, pay later” is a good proposition for US consumers at that age, unlike traditional credit with which they might end up paying up to 20, 25, and 30 percent of interest, consumers do not have to revolve and pay interest with this new concept.” The payment plan is lined out very clearly and the withdrawal of money from the bank account is automatic. There is a possibility of failing payment by situations such as the card is no longer active or not enough money in the bank account, but the chance of failing is less, and the late fee is clearer compared to traditional credit.

The familiarity of credit among consumers would make it easier to promote financing plans in the US. And the trend to refuse traditional credit in the younger generation is similar to what happened in the Chinese market, which provides another opportunity to develop features that do not involve credit and interest, such as “Buy now, pay later”, as Interviewee M said.

The percentage of people who have used payment in a store that involves scanning or showing a QR is between not so many and half the population. QR codes are most common when using an app to pay, for example, the Starbucks app, where you can link your card to the loyalty account of Starbucks and pay with a QR code. And there is a trend to pay with QR codes in restaurants to achieve a touchless experience because of the pandemic. Another example is that by scanning a

QR code, people are able to put themselves on the waitlist for a restaurant or driver’s license or check the menu at the restaurants. “So, consumers generally know what a QR code is, and they feel safe using QR codes for payment. There are competitors in the market like Apple pay and Google pay which are more familiar to consumers, but QR payment is also being more adopted” says Interviewee M.

The adoption rate of QR codes is promising among the population, besides payment, the QR code is used in multiple services, and a high trust is observed, which provides a friendly environment to develop more QR code-based payment features.

In the US, different states can set different regulations regarding payment. It is possible to roll out a fairly standardized payment method, but there are local state regulations that need to be taken into consideration, for example, as Interviewee M says “pay in four (installment) works in California, but it is not possible to be adopted in New Mexico.” So, it would not be super easy to roll out a new payment method when there are a lot of regulations in different states to keep in mind.

As the regulations differentiate between states, it would take a lot of time for Klarna to develop a standard payment method. Other than this, there has not been any obvious difficulty in rolling out a new payment.

“To buy a set of headphones that are worth $100, most of the time a 25-year-old consumer would do at least a quick research online to see where it is cheaper” says Interviewee M. Generally, the more money consumers are going to spend, the more sensitive they are to the price. And they are also being influenced most of the time usually by their friends and social influencers, while the older generations are more likely to be influenced by friends and family. The conditions to create an environment to attract more consumers to use in-store mobile payment in the US is similar to the environment that the Chinese market has.

Almost all the merchants in the US are providing cash, cards, and NFC with mobile, and the majority of them are offering digital-wallet options. But as the possibility of using cash in-store is high, there is barely anyone who is using this payment method and it is ranked as the least preferred method. As cash is not used by consumers as it used to be, instead, cards are becoming more used than cash because people always bring cards with them. Almost all the people are using cards and it is the most preferred method. About half of the population are using mobile NFC and it is ranked as the second most popular, which is more used in places like a market where there are different small vendor shops. Although not so many people are using digital wallets such as Klarna in stores, it is ranked as the third most favorable method among consumers, following cards, and NFC. Cards and NFC are more used and preferred than digital wallets because currently people are more familiar with them.

Interviewee M says “There is a limit to the amount of NFC for lower dollar amounts, and people do not concern too much about losing their card because they can either dispute a purchase with the bank for a credit card that is being stolen and used. And the card can be quickly frozen with the bank, and nobody can make a purchase on it. The same goes for mobile phones if people have set up a touch ID or Face ID to protect them.”

Different from what China used to be, the payments in-store in the US do not rely much on cash, and there exist a lot of methods that are much more convenient than cash such as cards and NFC, which is different. A lot of people have been addicted to using these two payment methods, and we can observe a growing trend of using digital wallets. It is also different for the US that the less- cash society has been established to a large extent with various other payment methods, whereas China used to be a cash society. And as the population who are using or are willing to use a digital wallet are not the minority, there is a huge potential to develop much more new mobile payment features in the US.

4.1 Overview of similar, different, special characteristics of each market An overview of the similar, different, special characteristics of each market based on the deeper analysis has been compiled in Table 3. The overview should be read with the previous analysis and survey answers in mind as the similarities and differences can be of different degrees.

S means the performance of a characteristic in a country is similar to what we found in the Chinese market. D stands for a different performance. H is used when it is hard to determine a similarity or difference. For each characteristic, if it is observed to be different in fewer than 5 countries, then the D in these countries will be identified as special, abbreviated to X. Special characteristics can be a possibility to create specific features that cater to those markets.

Table 3. Overview of the characteristics in each country

A lot of similarities do not necessarily mean a higher likelihood of successfully adopting mobile payment methods than other countries. The reasons behind the similarities, differences, and specialness and their indications will be discussed in the following parts.

4.2 Comparison of markets A comparison across all markets has been conducted according to the results from interviews and surveys in this chapter, while a more in-depth analysis of the comparison will be given in discussion.

The survey showed general high use (3-5 on a scale of 5) of mobile banking apps across all countries, but the purposes differ. Apps are usually used to do transactions, checking balances, etc., which suggests high trust in mobile payment in the future, and makes the adoption of mobile payment features more viable (Xin, et al., 2013)). While people in countries like Germany use it more often to do authentication to log into other apps, a primary trust has been established with mobile apps.

Expectations of transaction time are slightly different in the markets, but a relatively much longer time is observed in the DACH region (Germany, Austria, and Switzerland) where cash is much more adopted. Higher tolerance when spending bigger amounts because of using loyalty points or financing plans.

Authentication methods are similar for all countries, password/code, face recognition, and fingerprint being the most common ones. Younger generations prefer biometrics. SMS OTP is commonly used as two-step verification. Nordic countries have a local bank-owned authentication app that is used more. There are also new types of authentications such as VoiceID in Australia and Phone-call OTP in the US, and products similar to BankID exist in Poland. Much more cumbersome methods have been observed in the German market, such as the TAN transaction list and 6-digit pin, so they generally have a higher tolerance on the complexity of authentication methods.

Personal data that are willing to be shared with merchants are generally full name, date of birth, and phone number. With Klarna the social security number (or substitute) can be shared, if necessary, some partially, others not at all. Verification is done with slightly different data, but the data provided to Klarna can cover the ones required to register a loyalty program. Overall, more willing or only willing to give data if the customers see the need to give it to them, the exception is Sweden where personal data can be searched online, and people are very open with sharing them, same with China (Zhang, et al., 2018).

People’s attitude towards traditional credit in the west is generally negative across countries because they do not want to pay extra fees or are afraid of revolving, which is how the Chinese consumers feel about credit cards as well (Lin, et al., 2019). An exception is the UK and US market where people are familiar with traditional credit, but a trend of dislike can be observed among younger generations. Traditional credit is also common in NO and with younger generations in FI.

New credit concepts such as ‘Buy now, pay later’ are universally accepted in all countries, especially in young people who are also one of the target groups of Klarna.

Adoption of QR payment is observed to be low (1-3 on a scale of 5), highest were Italy where half the population is used to scan a QR to pay with Satispay and US when paying with apps like Starbucks and Norway. Exposure to using QR outside of payment situations is very different for the countries. Some markets are very used to scanning QR codes to see the menu at restaurants or checking in at locations such as AU, FR, ES, IT, UK. But other markets have very little contact with QR codes. Payment with NFC is more established across all markets except in some rural areas where the adoption of the POS terminal is slow.

Generally rolling out completely new concepts takes longer, and developing existing products is much faster. In some EU countries, it is easy to copy and adjust products by companies based in other (EU) countries. Most countries have only one dominant authority controlling the regulations on the realization of financial products, while the US regulations differ among states.

Price sensitivity and influence from other people are observed to be high and similar in all markets.

Across all markets, there’s high integration of NFC and the majority of POS already supports it. Developing in-store mobile payment could be easier adapted with NFC. Only very small parts of markets show the need for payment without POS, which is one of the advantages of using QR codes. A special case is BLIK in Poland, it is different from mobile NFC and digital wallets, and it is used by half of the population and ranked as the second preferred payment method.

Cash is being used by the majority of the population in Italy, Poland, France, Germany, Austria, and Switzerland for different reasons: The adoption of POS terminals in rural areas of Italy is slow, smaller boutiques in Poland and most merchants in other countries listed above prefer cash because in that way they can achieve the lowest operating cost. Younger generations in places such as France and Germany do not like cash, but they do not have many other choices.

The study found four cash societies, AT, CH, DE, and FR. They are defined in the survey by higher cash acceptance (almost all) than card acceptance (majority) at merchants, in combination with cash being the first or second payment of choice given all choices available. This is especially heavy in Germany and very rooted traditionally. While France is barely on the edge of being a cash society, cash is decreasing and consumers dislike cash. France still falls in this category due to high merchant fees for small transactions; the merchants are forced to only accept cash, which leaves consumers no choice. The same situation with high merchant fees can be observed in the DACH region, with a lot heavier cash usage. And the interviews indicate that cash societies show more hesitation towards new technology. Despite this, the technology is still advancing, and the

66 younger generations are frustrated by the current payment situation, which is a possible market entry.

The markets divided into four categories of in-store mobile payment, see Table 4: A. Has an established in-store mobile payment with NFC (apple pay, Samsung pay etc.) B. Has an established local in-store mobile payment method (Blik, Mobilepay, Satispay) C. No established in-store mobile payment, openness from merchants and consumers D. No established in-store mobile payment, high cash usage-controlled by merchants, consumers are less used to handling money on mobile

Table 4. Categorization of the markets ordered from A-D

5 DISCUSSION

This chapter will discuss the findings from the analysis and connections to the theories from the literature study. It also includes suggestions for future development when it comes to in-store mobile payment in the researched markets.

5.1 Mobile payment today In China, in-store mobile payment is used for everything, from people selling flowers on the street to big shopping malls, from street food to fancy restaurants, it is used to order food in an end-to- end experience and collect all your memberships. We believe one of the reasons why all merchants, including small shops, use mobile payment is because of the easy setup for merchants and that no POS terminal is needed. Another reason is how versatile it is for consumers with many features around the in-store mobile payment, for example, financing, discounts, and how easy it is to register memberships (collect points) during payment in the same app. Compared to the western countries studied, while mobile payment is already very popular, 10 out of the 15 countries in our study have adopted in-store mobile payment, the in-store mobile payment is very limited to the same functions as a plastic card and bound to a POS terminal. This is partly due to the use of NFC without other surrounding features (with the exception of Satispay in Italy). And it is one of the reasons why many countries have already adopted in-store mobile payment but the integration of it is not on par with China. However, the results indicate that the western countries are ready for in-store mobile payment at varying degrees, with DE, AT, and CH on the edge of readiness with the growth of younger generations and shifting of regulations.

In Categories A and B, the diffusion of innovation (Rogers, 2003) has reached the “late majority” of the population and mobile payment is the first or second choice of payment method if they can choose freely. For both consumers and merchants in these markets, it is easy to adopt a new mobile payment method because familiarity, trust, and preference are already established due to the innovation being diffused.

The diffusion of innovation in Category C is limited to “innovators”, and “early adopters”. There are prospects of a higher adoption rate as the compatibility with existing values, previous experiences, and needs of the user are high (Rogers, 2003). While Category D has about the same diffusion, they are at an innovation window where they could jump to a new S-curve from cash payments.

Contrary to countries where high adoption of mobile payment methods is connected to low cash usage, Poland stands out as a market with high adoption of in-store mobile payment and high cash usage. Similar to the cash societies, the cash acceptance at merchants is higher than the card acceptance, meaning there are merchants that only accept cash. However, Poland’s own in-store mobile payment system BLIK has been adopted to a high degree and is preferred and used more

68 than cash where it is available. This is contradicting our assumption that high cash usage and high mobile payment do not work together, based on the case of China. We believe this is because the consumers are technology savvy but are met with resistance from merchants. Another case is the countryside of Italy where cash is still heavy, but the big cities are more tech-savvy.

Given the overview of in-store mobile payment above, the following chapters will focus on discussing the kind of mobile payment methods that Klarna wants to introduce to the markets. Discussion about the difficulties during the adoption in several special markets, and ideas for further development around topics such as payment features, features that aim at attracting new users (merchants as well as consumers), and other permanent features that help to bring a smoother experience and encourage people to use in-store mobile payment more often.

5.2 Difficulties in entering markets Currently, the usage of digital wallets in stores is not well adopted by consumers across the markets. Answers to the question “Estimate how many consumers use the following payment methods in store?” are mostly ‘barely anyone’ and ‘not so many’, Italy is exceptional with the answer ‘half of the population”. Consumers in different countries often see digital wallets as their last choice, except in the US, SE, and NO where the rank is one position higher. This suggests consumers currently don’t see the relative advantage of digital wallets and perceive other existing methods to be better (Rogers, 2003).

Although the general situation seems not to be promising, there are cases in the form of digital wallets or similar concepts that have been well accepted by people. Satispay in Italy is such an example, it has been used by half of the population according to the survey and Interviewee G explains that the payment product spreads fast in cities such as Milan where people are more technology savvy. Although it meets some merchants’ need for lower operational cost, Satispay is more complicated to use than NFC and cards, and it has a lower monthly transaction allowance which brings a less friendly user experience. Although still less preferred than NFC and card, it has gained a large user base and is expanding fast in Italy, which shows the possibility to adopt digital wallets in stores fast in places where people are technology savvy.

In countries where the adoption of new technologies is slow, the adoption speed could also be slower. Such as Germany, where people are still using fax machines and other cumbersome authentication methods, almost all the merchants prefer to use cash to reduce operational costs, and people there are skeptical about things, including new technologies, as Interviewee B said. It will take a longer time and higher costs compared to other markets to teach consumers to use and trust new things and to let merchants adopt new devices or apps. The best solution for these markets is the one that has the minimum costs for consumers and merchants, and with this kind of solution,

69 it is just a matter of time and trial to adopt digital wallets in their stores successfully. The same goes for countries such as Austria and Switzerland which are similar to Germany.

Another difficulty would be to develop a unified payment solution in the US as each state has its independent authority controlling the local regulations of financial products. But as a lot of other digital financial products have adopted a lot in the US, for example Apple Pay and Google Pay, Klarna must also be able to handle this issue although it takes time.

The development of BLIK is special, but it also evokes a worry about developing digital wallets in Poland. According to Interviewee J, BLIK was introduced by the Polish authority to protect the local financing market before the introduction of Apple Pay, and it proved to be more well- accepted among consumers and more competitive than Apple Pay. But Apple Pay is still regarded to be easier to use and people are beginning to use Apple Pay, which indicates chances for developing more digital wallet products in Poland. Therefore, the adoption of Klarna’s products must be viable as long as Klarna's offerings can achieve a better user experience.

5.3 Ideas for further development Based on the analysis of the characteristics in each country we try to answer the third research question “What suggestions can be developed with the readiness of these characteristics?” in this chapter and discuss pros, cons, and how we make these suggestions for future in-store mobile payment solutions.

5.3.1 Primary payment solutions The characteristic low adoption of NFC is based on the fact that NFC was not very common in China as payment in-store (Huang, et al., 2020; Klein, 2020). However, during the collection of data, we found that the adoption of NFC is very high in western countries and that a deeper and more nuanced analysis is needed. Both high and low adoption of NFC could be great for the future of in-store mobile payment, it depends on what kind of solutions that we want to develop in each market. For example, in markets with low adoption of NFC solutions that are similar to what China has could be developed, whereas in markets with higher adoption of NFC, new features based on NFC could be more easily adopted.

The study found merchants and consumers in all markets to be familiar with NFC with cards and a rising trend to use NFC on mobile in markets such as AU, DK, FI, NL, NO, UK, US as well as in bigger cities in ES and IT. We would conclude that in-store mobile payment with NFC is easier to adopt due to the familiarity based on the Halo effect (Sonja Gensler, 2012). Further development of NFC-related in-store payment solutions are incremental innovations, and this innovation is already diffused into the market with the majority using it. Therefore, it would be less costly to teach both the consumers and merchants to use NFC.

When it comes to familiarity with QR codes for payment, the integration of payment features is very low, but QR is used on the regular for non-payment tasks in markets such as AU, DE, ES, FR, IT, UK, US. Meaning the complexity is low in these markets as they have no difficulties in understanding or using QR (Rogers, 2003). Scanning QR is used for activities like registering membership loyalty points, checking in at locations, and scanning QR codes on the tables in restaurants to look at the menu. This is a great opportunity to make QR an end-to-end experience if the scanning and paying function can be integrated into one service, which we see in the Chinese market today. The familiarity with QR codes in these countries can use the halo effect to carry over into payment features (Sonja Gensler, 2012).

However, given the high adoption of NFC for both merchants and consumers across all the markets, how relevant is it to introduce QR codes as payment? The two options are similar in time and effort for the consumer to use. One of the advantages of scanning QR to pay for the merchant is that no POS terminal is needed, which is a huge incentive in China (Klein, 2020). This need has been found in markets such as SE, PL, FR, AT, DE, and the countryside of IT and ES, and also lowers the cost for merchants. There are also special cases like the red cross asking for donations. Due to the lack of POS terminals, it could be an opportunity to introduce terminal-less mobile payment with QR codes. Not to mention the development possibilities for features using QR, looking at the Chinese market which is market dominant. It is also worth noting that QR code payment can co- exist with NFC, as seen in the US market where QR payments have become more popular due to their completely touchless nature, as well as IT and NO. Therefore, we can argue that despite NFC being overwhelmingly more adopted, QR codes are still a relevant payment feature to introduce to the market, especially to reach an end-to-end experience that we found in the Chinese market.

For the cash societies AT, CH, DE, and FR, the merchants prefer cash due to high merchant fees and therefore there are very few payment options offered to consumers, this shows that merchants are price sensitive. These two characteristics and the situation is very similar to China before mobile payment and could be an opportunity to introduce in-store mobile payments (Klein, 2020). The prerequisite for this to work is that the in-store mobile payment offers low merchant fees.

French consumers are skeptical of new technology, but if they see the usefulness, they are open to adopting it. Not needing cash for payments under €15, is arguably useful for consumers that dislike using cash. The time saved during payments compared to using cash is another useful factor to the French consumers who have an expectation of fast payment for lower amounts. This suggests successful adoption of mobile payment in the future as this follows the development in the Chinese market where a smooth user experience is expected (Daxue Consulting, 2021). In the DACH region, using the same thought process as in France, if merchants were given lower fees, there could be more adoption of other payment methods. Looking at how rooted cash is traditionally,

71 especially in Germany, older generations prefer cash. In-store mobile payments would most likely only reach the younger generations.

So, we would suggest

1. Two solutions for in-store mobile payment: Scan QR and NFC

Scan QR to pay: Open Klarna, Choose Scan to pay, Scan the QR code, Put how much you want to pay, Choose payment method (debit card etc), Authenticate payment

Tap NFC to pay: Open Klarna, Choose pay with NFC, Choose payment method (debit card etc), Authenticate payment, tap the POS terminal Second NFC function: Activate NFC function on phone, Authenticate payment, tap POS terminal

Our suggestion for initial introduction for the four categories:

Category A - Pay with NFC. The markets in this group are used to NFC, especifically mobile payment with NFC. Consumers are already familiar with mobile NFC, which makes it easy for Klarna to adopt NFC based mobile payment.

Category B - NFC and/or QR code. The Italian market is used to NFC and QR payment in the big cities, while the countryside is lacking in POS terminals, therefore both payment methods can be suggested to be introduced. Blik in Poland does not use either payment function. Consumers are more used to NFC with cards, also there are merchants lacking terminals, therefore both can be suggested here as well. Mobilepay in Denmark uses QR codes for payment at POS and while NFC is highly adopted.

Category C - NFC and/or QR code. The markets are very used to NFC as payment with cards and there is an observed need for terminal-less payment with the prerequisite of low merchant fees. Although the adoption of NFC with cards is high, the adoption of NFC with mobile is low in Category C. QR payments exist in P2P and P2B products in NO and SE, but are not frequently used, while consumers in FR have experience scanning QR when looking at a menu. As such the markets in Category C are familiar with both NFC and QR payments that could carry over and expand to in-store mobile payments with the Halo effect (Sonja Gensler, 2012).

Category D - QR code. The markets are cash-heavy, merchants are price sensitive and prefer cash. Introducing a QR code payment solution without the need to buy a terminal is a smaller investment for the merchants.

This category also has a prerequisite of low merchant fees, which is similar to what is observed in the Chinese market (Klein, 2020) and indicates the possibility to develop and adopt payment features with lower fees, for example, QR code payment.

French consumers and merchants are categorized into two different groups, but as the merchants in France hold the power over what payment options are offered in-store, when developing in- store mobile payment in France recommendations for Category D should be followed.

Eventually, with the growth of in-store mobile payment and more features related to it, we believe both payment solutions are a good fit and can be introduced to all Categories A-D, especially the QR code solution which has a possibility to bring end-to-end experiences in the long term. These two solutions also fulfill a very important characteristic, that is, a fast payment solution, which is expected by all markets except the DACH region.

At the time of writing the thesis, Apple has blocked the development of features with NFC on their devices, which means everything needs to rely on Apple Pay. In comparison Android is more open. This is an industry-wide reason why NFC is not being used as a way to pay other than for digitized cards, and companies are waiting for this block to be released. In this situation, we would suggest developing QR code payment as we believe it is an important part of future in-store mobile payments in all markets.

The reason why Scan QR is suggested instead of Showing QR is because it is more inclusive and has more future development possibilities, as well as familiarity in many markets. Scan QR to pay displays the QR code and promotes the observability of the innovation being used by others, which can encourage the diffusion (Rogers. 2003). Showing QR to pay is primarily used by bigger merchants in China because it requires integration into the POS system and a terminal, while Scan QR doesn’t require a terminal, as explained in the background study. Showing QR is limited to payments only, which eliminates the possibility of further integrations of features away from a POS. This means smaller merchants and the need for terminal-less payments cannot be included, and big companies with complicated payment systems might choose to not add this function due to the changes needed. Scan QR requires little integration and change for complicated payment systems so it's easier for big companies to adopt it with a low cost for the company as a trial. When QR is more established and used by many consumers the trialability is higher (Rogers, 2003) and there is more incentive for big companies to invest in adding Showing QR, which could be costly to integrate into the payment system.

2. Direct debit payment and "Buy now, pay later"/"Pay in three" for in-store mobile payment

For the markets that already have an established mobile payment solution, Categories A and B, what are the incentives for them to switch to a new in-store mobile payment method? One idea is to offer both direct debit payment and "Buy now, pay later" alternatively "Pay in three" for in- store mobile payment in the Klarna app. The interviews revealed positive attitudes to “Pay later” in all the markets of Categories A and B, often as a replacement for traditional credit. “Pay later” offers a different service from the currently established in-store mobile payment solutions, being an incentive for consumers to use Klarna in-store mobile payment. It is also a good fit for Sweden in Category C, which also showed positive attitudes to “Pay later”. This supports the relative advantage and compatibility of the diffusion theory and encourages higher adoption rate (Rogers, 2003). Since “Pay later” is one of the defining concepts of Klarna, we believe that this is a good move strategically for Klarna to get more established in-store. However, with the strategy of promoting “Pay later” more in these countries, multiple options such as “Pay in three” are suggested across countries to satisfy the various preferences of consumers.

After opening the Klarna app and choosing a payment solution, the payment method can be chosen (default method and switched), before authentication and completion of the payment.

5.3.2 Provide end-to-end service and smooth shopping experience Apart from suggestions about choosing the best-fit payment solutions for each country, suggestions that help provide a smoother and time-saving experience with using mobile payment in-store were also suggested. With these features, the aim is to attract users to use the payment solutions more often.

Usage of QR

Although the scores of the adoption rate of QR in payment in most countries are between 1(barely anyone) - 2(not so many), there are a lot of other use cases of QR, such as looking at the menu at restaurants and bars in the US, FR, ES, IT.

In the background study of in-store mobile payment in western countries, we found that there is a trend of chain cafes and restaurants (McDonald’s, Starbucks) offering mobile apps which consist of functions such as checking the menu, making orders, and conducting payment. Developing apps takes time and money, which makes it difficult for mom-and-pop/local restaurants and cafes to provide similar services.

Therefore, this suggestion was developed:

3. Integrate merchant pages in the in-store payment solution

Similar to mini-apps in Alipay, let merchants connect their stores to the Klarna app. Building on the observed cases of scanning QR in restaurants and bars to look at the menu, a merchant page that allows payment directly in the app would make it a smoother end-to-end experience for consumers, while also bringing Klarna more in-store. To realize this idea, there should be an easy setup for merchants with templates or modules. At the moment Klarna is featuring many merchants on the app, but it redirects to their web page and primarily targets online shopping but also includes restaurants like MAX for ordering food or takeaway. This means merchants that do not offer a web page with the ability to order cannot be included, which is the case for many restaurants and cafés. But as Klarna is more of a financial product, to minimize the influence on Klarna’s brand image, it is worth considering collaboration with other service providers to realize the features.

Personal data/loyalty membership

People’s openness to share personal data with merchants as well as Klarna are different in countries. Two extreme examples are Germany where people are not willing to share anything if they do not see the need and Sweden where people are generally willing to share any personal data because these data can be reached online by anyone.

Although the willingness differs, by comparing the personal data that is required to be able to use Klarna and to register a loyalty program, we observed that across all markets the personal data that is required to use Klarna’s services can cover the ones that are used to apply for a loyalty program most of the time. Loyalty programs play an important part in consumers’ interaction with merchants, such as collecting or using points and coupons, which usually happens at the POS.

The initial registration of loyalty membership requires information about the consumer's personal data and when the information is given to the merchant at the POS in-store. The process takes time and can be seen as a hassle, causing people to not register. Since the information for memberships are covered in the information given to Klarna, to streamline the process and save time, there is a possibility to

4. Quickly register a new loyalty membership in-store at the merchant through the Klarna app, by autofill information.

Since it is personal data, it must be handled carefully. Consumers must have control over what data they are willing to share with the merchant and only share necessary information. For example, the consumer can scan a merchant QR code in-store for registering new membership with the Klarna app and have all the information auto-filled. If they feel comfortable sharing the information, they can continue to complete the registration.

After registering a new membership, when purchasing in-store there are usually two steps, the first step is to show your membership for the loyalty program with either mobile apps or card, and then complete the purchase with a payment method. The value of Klarna is to create a smoother purchase experience, and at the POS this can be done by:

5. Automatic registration of points when paying with Klarna in-store mobile payment.

This saves time and ensures consumers get points for every purchase. Collecting membership cards on the Klarna app also enables the use of points and coupons with Klarna’s payment methods without opening another app or showing membership cards. These two functions are aiming to raise the relative advantage and satisfy the need of both the consumer and merchant in compatibility (Rogers, 2003)

Expectation on fast transactions

The survey results show acceptable time for completing a payment in-store differs in the markets, and the three scenarios. During the interviews we found that most estimations are given by a rough calculation of local usual practice: cash in DACH, cards and mobile payment in other countries.

The time spent on buying a cup of coffee could be regarded as the “basic transaction time” with the usual practice because usually there is no participation of extending guarantees nor applying for financing plans. Answers for basic transaction time differ in countries. For Germany it is longer because using cash to pay is time-consuming, while the difference among countries depend on several reasons: The estimation itself is not accurately calculated; actions such as picking cards out of the pockets have been counted in some countries, while in the others they are not counted. Some are using cards with a pin code, while others are using cards with NFC. But with the fact that cards are used as the usual practice to calculate consumers’ general expectation on time spent at the POS in most countries, we can conclude that most people in countries except DACH expect a fast transaction with cards as a standard. The fastest times could be observed in countries with high mobile payment adoption with NFC. The expectation on faster transactions is similar to what in the Chinese market (Xin, et al., 2013), and shows the demand to develop a faster and smooth shopping experience. When it comes to bigger payments many markets brought up financing plans as payment options which added several minutes to the transaction time, which might lead to consumers’ not completing the payment or altering to another payment method.

As we learned from the Chinese market, one of the reasons for the fast adoption of mobile payments in stores is that the payment experience of these methods is faster and smoother than the main competitor, i.e., cash. Therefore, to compete with the standard card payment in the western markets, we would like to suggest participants to develop in-store payment methods that are faster than cards, for example, reduce the steps that require consumers to conduct at the POS. Such as

76 converting ‘pay later’ to financing plans which exist in Klarna. With this solution, the time spent on applying for financing at the POS could be reduced. It would work well for countries where the application for financing is strict and requires a lot of personal data.

A possible solution could be:

6. Promote solutions for faster transactions when using financing options, such as change their financing option after payment

5.3.3 Attract new users and improve stickiness Similar to China, high price sensitivity has been observed across western markets. Alipay’s ‘hongbao’ has made use of Chinese people’s high price sensitivity and attracts a lot of new users to use Alipay in stores (Dibaiquanqiutong, 2017), similar to Satispay in Italy which adopted its initial user base successfully with a large amount of cashback and zero fees and rewarding merchants with a lump sum for offering Satispay in their stores.

Another case is WeChat Pay’s version of ‘hongbao’ (Paulo, 2017). It is developed by taking advantage of a combination of group influence and traditional Chinese customs. Similarly, group influence gets a high score in all countries.

Based on the high scores of these two characteristics, it is possible for Klarna to roll out new universal features to attract new users. Using ‘high price sensitivity’ usually means to develop benefits such as

7. Getting direct cashback, discounts, or coupons which are clear and straightforward, while the drawbacks are that they will increase the operational cost for either Klarna or merchants and these incentives are temporary so that it is hard to predict what consumers will behave afterward. However, it could be one way to drive new customer acquisition and break into Category D. If Klarna is helping merchants generate more traffic in their store, the operational cost of the promotions could be partially or fully relocated to the merchants.

Group influence features, for example,

8. Consumers get rewards after inviting friends to use mobile payment in store 9. Develop features that connect with the local group activity customs (needs further research by each market)

Idea 7 and similar solutions are direct and costly, while idea 8 is durable but hard to be tested out.

Besides attracting new users, the high price sensitivity and group influence across countries show a possible direction to maintain and improve the users’ stickiness on the in-store mobile payment platform. For example,

10. Develop a feature which shows the stores and big sales nearby the current user. 11. Cooperate with offline stores and provide special offers including products or discounts that are available only through paying with Klarna in stores. 12. Develop games that involve daily collecting activities and interactions with friends.

6 CONCLUSION

The conclusions drawn from the study are presented in this chapter, including future work for the suggestions and research in the subject.

The payment situation and conditions are different between the western markets today and when mobile payment was first introduced in China a decade ago. The western markets in this study are very modern and have fully adapted debit cards, further solutions like NFC payment, QR code usage, and in-store mobile payment. While China, before mobile payments, relied heavily on cash with a modest adoption of debit cards, meaning that the baseline payment environment for introducing in-store mobile payment is not the same.

The characteristics which led to the fast adoption of mobile payment in China also revealed many similarities between China and the western countries, being about attitudes, expectations, and experiences, and despite the fact that there are differences that do not mean the in-store mobile payment is not fit for western countries. Quite the opposite, very high readiness was found in the markets partly due to a high adoption rate of in-store mobile payment with NFC. Through surveys and interviews, the mapping of the western countries’ readiness for in-store mobile payment could be completed. Based on the analysis of the western markets, suggestions for further development and the future of mobile payment were discussed. Because of the familiarity with NFC and the high integration of POS terminals supporting NFC, it is deemed to be a good payment solution that can familiarize consumers to pay with mobile in-store. But using NFC requires a terminal, which means features that offer payment away from a terminal are not possible. Therefore “Scan QR to pay” is considered an important part of the future of in-store mobile payment in western countries because it is terminal-less and opens up possibilities to link more features to the payment process, making it an end-to-end experience.

Future work for in-store mobile payment includes developing the suggestions further, making prototypes, and testing. Development of new features based on what is special about the western markets. Further research is also needed on how to prepare countries that are not ready for in-store mobile payment and finding new in-store mobile payment methods. As profitability plays an important part in analyzing the viabilities of products, research on revenue models and suggestions for improvement in each country is also suggested.

7 LIMITATIONS

A lot of analysis and discussions have been conducted with the interviews and surveys, but some limitations might have an impact on the data and subsequently the conclusions and ideas that we developed.

First of all, we have tried to reduce the bias in data and therefore chose to conduct the interviews with experts from Klarna in each market rather than Klarna’s consumers, but bias still inevitably exists in other forms. For example, given the fact that Klarna has adopted or planned to adopt in- store mobile payment in a country might leave a subconscious on the interviewee that the adoption is viable in this country, and therefore slightly influence the answers for questions such as “Willingness to share personal data with Klarna” and “What is an average 25-year-old consumer’s attitude to credit?”.

Another limitation in the interviews is that the answers are rough estimations based on the experts professional knowledge about the market. However, as their positions in Klarna such as product manager, accountable lead, commercial manager, consultant and experience as a local consumer show a good understanding of the market, the errors in estimation might be slight. During the interviews, we got a better understanding of the interviewees' thought process and reasoning for the answers, and in this way we are able to interpret the answers and explain them in the analysis, discussion, and conclusions to make our results more reliable.

Two further limitations are found in the interview questions and interviewees. To make questions clearer and easier to answer, modifications have been made twice after the conduction of the first two interviews, the UK and DE/AT/CH respectively, which resulted in slightly different understandings of the questions in these markets compared to later interviews. To solve this problem, we have tried to interpret the answers from these two interviews to fit in the latest version of the survey. Secondly the surveys in the UK and FI countries are answered by two interviewees respectively due to reasons such as the lack of time or knowledge about a specific question. But as the professional knowledge of these experts is worth trusting, the impact can be minimized.

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APPENDIX A

In-store solutions in the western market

Country Product In-store solutions Website Description www.swis Scan merchant's QR; h.nu/use- Peer to peer transactions, and show QR to merchant; case/in- businesses, input the phone number Sweden Swish Tap-and-pay store or scan the merchant´s QR code scan merchant's QR and https://ww enter amount, order in w.vipps.n restaurant (pay o/produkt immediately), customer er-og- pay through message; tjenester/ Scan QR in terminal and bedrift/ta- pay directly; pay with betalt-i- Norway Vipps BankAxep butikk/ Norwegian equivalent to Swish Scan merchant's QR / show QR to merchant. https://help.venmo.com/hc Products similar to Swish, /en- offering p2p and p2b us/articles/360050514333 transactions. -How-to-Pay-with-Venmo- Products can be found in- worldwide Stores#:~:text=Venmo%2 0QR%20codes%20allow Peer to peer transaction between %20you,your%20camera venmo accounts, starting to get %20to%20scan%20codes https://ve accepted as in-store payment by USA Venmo . nmo.com/ some stores like Forever 21 loyalty cards / scan QR https://ww codes and enter amount / w.payconi Bancontact show QR to merchant / q.be/en/p Payconiq Tap and pay rivate/pay Belgium Company -in-store show bar code to merchant, voucher, stamps, loyalty cards are automatically recognized / https://blu Germany, scan the QR on vending ecode.co Austria Bluecode machine to pay m/en/

Appendix A:1(4)

Use phone number, create links or scan QR https://de codes at PoS veloper.m https://mobilepaydev.githu obilepay. b.io/MobilePay-PoS- dk/produc Finland, v10/payment_flows#paym ts/payme Denmark MobilePay ent_flow ntlinks https://ww w.mbway. SIBS/MB Pay with QR or NFC with pt/funcion Portugal WAY an terminal alidades/ https://ww w.twint.ch /en/busin ess- Scan QR on PoS, vending customer Switzerlan machine, sticker to pay a s/product d TWINT fix / flexible amount. s/ https://ba ncomat.it/ it/bancom at/banco mat- Bancomat pay%C2 Italy Pay Scan QR to pay %AE European Joint initiative in Europe to Mobile Joint initiative by several European bring local mobile payment Many Payment countries with different payment solutions like Swish to European Systems https://em methods such as Swish, Vipps and European level countries Association / psa.org/ more Contactless payment method developed by mobile manufacturers and card service suppliers. They do not provide any Apple financing service other pay/Google than linking your pay/Samsu Link credit/debit card to pay credit/debit card Worldwide ng pay etc. Requires a POS machine contactless in store Use their app to book tables, order Pinchos https://ww food on the phone, and it will tell you Apps for in-store order and (restaurant) w.pinchos when the food is ready to collect. Pay payment on the phone, Sweden app .se/app in the app after the meal developed by big chain https://es restaurants/cafés Espresso pressoho Customers can use the app in-store to House use.com/ order the drink and food, and pay. Or Sweden (Café) app myespres order as pick up.

Appendix A:2(4)

sohouse/

Machines at the entrance to order Sweden/W MAX/McDo food and pay. Also available to order orldwide nalds in app Self checkout. Scan a QR code for UK, Mishipay, scan your products by Sweden, cooperate with other https://mi yourself and pay on your phone across payment solutions when shipay.co anywhere in the store. Show the Self checkout. Scan the Europe Mishipay checking out m/ receipt to the cashier on your way out. products by oneself and pay on the phone Consumers in IKEA can pay at anywhere in the store anywhere and anytime on a website Klarna pay and bring the products directly with without them to home, so that they do not counter in need to go to the counter to pay for Sweden IKEA the products In addition to online payment also Dutch, offers point of sale terminals: operating https://ww Countertop, Mobile, Portable, Doing everything about in Europe, w.adyen. Multimedia and Unattended in-store payment parts of com/pos- payment solutions. (Self-scan and Asia, payments pay, Pay with a QR code, Pay via a America Adyen POS terminals /terminals self-service kiosk) Australian, operating in Canada, the United Kingdom, Australia, the United https://ww States, w.afterpa and New y.com/en- Zealand Afterpay APP AU Pay later service, installment plan Pay later service, https://ww installment plans w.affirm.c om/press/ releases/ affirm- announce s-new- app- enabling- consumer s-to- USA Affirm Virtual card, APP shop- Pay later service, installment plans

Appendix A:3(4)

anywhere -and-split https://ww w.quadpa Pay later service, installment plans, NFC with linked bank card y.com/ap available in-store with linked bank USA Quadpay on mobile APP p/ card https://ww w.nets.eu /en/paym Denmark. ents/in- Online payment. In-store only Offering terminals, online Europe nets offering terminals store/ traditional terminals. payment and app. offering terminals. Pay https://ww with QR code through w.zettle.c swish and Klarna om/se/bet https://www.zettle.com/se/ allosning App, terminal. supports payment with Sweden iZettle betallosningar ar QR Swish, Klarna in-store

Appendix A:4(4)

APPENDIX B

Interview guide - semi structured

1. Can you give a brief description of Klarna’s demography?

2. Please estimate how many adults use mobile banking apps 5=almost all ; 4=majority; 3=about half the population; 2=not so many; 1=barely ● What are they used for?

3. How much time is acceptable for consumers to complete the payment in-store? Start from finding out your wallet or your mobile banking app, in three different scenarios: coffee at Starbucks, €100 of clothes at H&M, and a new Apple computer. ● Why is the time the same/different?

4. What are the most frequently used authentication methods for a financial app? Can you rank the authentication methods? ● Why are they the preferred methods in your market? ● Do consumers trust the less popular methods? Why are they not commonly used?

5. What kind of personal data are consumers willing to share with a merchant when creating membership? ● Why willing or not willing to disclose data? ● What personal data does the consumer need to share with Klarna?

6. What is an average 25 year old consumer to credit?

7. Estimate how many people have used QR? 5=almost all ; 4=majority; 3=about half the population; 2=not so many; 1=barely ● Where is QR most common? How is it used? ● What do consumers usually feel like when they see a QR? Do they trust the safety of QR? Why?

8. Which organisations are controlling the regulations of developing new payment methods? How easy is it to roll out a new payment solution?

9. Is it common to research, compare products and prices before buying? ● Do discounts motivate people to buy more?

Appendix B:1(2)

10. How often would consumers be influenced by someone else in what they choose to buy (friends or social influencers etc.) ● What age groups are most likely to be influenced?

11. How many merchants provide these payment methods? (cash, card, NFC, mobile methods like Swish and PayPal, anything else that you want to add.)

5=almost all merchants; 4=majority; 3=half the merchants; 2=not that many; 1=barely

12. How many consumers use the following payment methods in store? (cash, card, NFC, mobile methods like Swish and PayPal, anything else that you want to add.)

5=Almost all; 4=majority; 3=around half; 2=not that many; 1=barely.

● Why do consumers use these payment methods? ● Where is NFC most common? Where is mobile payment most common? ● Is there a limit to the payment amount of NFC? ● if there’s other methods, please describe how and where it is used

13. What method would consumers prefer to pay with if the store is offering the following payment methods? (cash, card, NFC, mobile methods like Swish and PayPal, anything else that you want to add) Please rank

14. What do consumers like/dislike about each payment method? (cash, card, NFC, other methods like Swish and PayPal, anything else that you want to add.)

Appendix B:2(2)

APPENDIX C

Survey results - Part I

What we want to QUESTION AU UK US understand Please estimate how many How much do consumers 1 = barely anyone adults use mobile banking use mobile banking - 2 = not so many apps (as opposed to implication that high usage 3 = about half the telephone banking or banking 5 4 4 means corresponding high population in a physical branch or trust on the security of 4 = majority internet banking on the mobile banking. 5 = almost all desktop)

How much time is acceptable buy a cup of coffee at 5-15 sec 5 sec 5-15 sec for consumers to complete Starbucks What are consumer the payment in-store? buy €100 of clothes from less than 1 expectations about how 5-15 sec 15-30 sec quick an in-store payment Choose from... H&M min will take? 5 seconds or 15 seconds or buy a MacBook at Apple 30 seconds or 1 minute or 5-15 sec 1 min + 1 min + longer shop Password, passcode 3 1 1

Face recognition 1 2 3

Fingerprint 2 2 2

Please rank the Gestures/Unlock pattern - - - What authentication authentication methods of a Electronic identification methods are mostly financial app based on system owned by banks 4 - - trusted frequency? 1= most (BankID in Sweden) frequently used SMSOTP - SMS/OTP primarily Others Voice ID memorable two step word verification

Willingness to share personal Full name Y Y Y data with merchant i.e. to

Appendix C:1(12)

send electronic receipt or Attitudes to use of create membership personal data as part of making a purchase in a Would an average consumer store share these data points if Date of birth Y - not year If required Y asked? Y/N

Social security number N N last four

Phone number Y Y Y

Full name Y Y Y

Willingness to share personal data with Klarna Date of birth Y Y Y

Would an average consumer If required share these data points if Social security number N for credit last four asked? Y/N check

Phone number Y Y Y

Appendix C:2(12)

Consumers are familiar with credit but there is a much more attitude against Very used to Do not like traditional credit. Many traditional credit in the people have credit card US now for What is an average 25 year multiple How used to credit are products but somebody old consumer’s attitude to credit cards. consumers? are open to who is 25 credit? Changing the buy now years old. attitudes in pay later more younger concept consumers adults. are willing towards debit and only spending what is available to you

1 = barely anyone Estimate how many people 2 = not so many Are consumers used to have used payment in a store 3 = about half the using QR codes as part of 2 1 2/3 which involved scanning or population an in-store payment? showing a QR 4 = majority 5 = almost all

SF FCA (Statutory (Financial Different Fund) and conduct states, the Are local regulations Which organizations control APRA authority), department around payments strict? these regulations? (Australian ASA can set their Prudential (Advertising own Regulation standards regulations. Authority) authority)

How common is it for a 1 = Never How "discount savvy" are typical 25 year old shopper to 2 = Rarely consumers. Is it common research, compare prices 3 = Sometimes 4 3 4 for people to only shop before buying? (ex. a pair of 4 = Most of the time when there is a discount? headphones for 100 euros) 5 = All the time

Appendix C:3(12)

How often would a typical 25 1 = Never Is it easy for consumers to year old shopper be 2 = Rarely form strong groups and influenced by someone else 3 = Sometimes 4 5 4 influence each other? in what they choose to buy 4 = Most of the time (friends or social influencers) 5 = All the time

Cash 5 5 5 Estimate how many merchants that provide these Card (credit, debit, NFC) 5 5 5 payment methods in store? The availability of different 1 = barely any NFC with mobile (like payment methods in 5 5 5 2 = not so many Apple pay) stores 3 = about half Digital wallet like Klarna, 4 = majority 4 1 4 PayPal 5 = almost all others (state what it is) - 1 -

Cash 2 2 1 Estimate how many consumers use the following Card (credit, debit, NFC) 5 5 5 payment methods in store? How much different 1 = barely anyone NFC with mobile (like payment methods are 4 3 3 2 = not so many Apple pay) used in store 3 = about half Digital wallet like Klarna, 2 2 2 4 = majority PayPal 5 = almost all others (state what it is) - - -

Cash 3 3 4

What method would Card (credit, debit, NFC) 1 1 1 consumers like to pay with if Consumers preference of NFC with mobile (like the store is offering the 2 2 2 payment methods when all Apple pay) following payment methods? are available Please rank them, 1 = first Digital wallet like Klarna, 4 - 3 choice PayPal others (state what it is) - - -

Appendix C:4(12)

Survey results - Part II

QUESTION DE AT CH ES IT DK FI

Please estimate how many adults use mobile banking apps (as opposed to telephone 3/4 5 3 3-4 3 4 5 banking or banking in a physical branch or internet banking on the desktop)

How much time is acceptable 30s-1min 30s-1min 30s-1min 20 sec 5-15 5-15 sec 5-15 sec for consumers to complete the payment in-store? 1min + 1min + 1min + 1min 30s-1min 30s-1min 30s-1min Choose from... 5 seconds or 15 seconds or 30 seconds or 1 minute or longer 1min + 1min + 1min + 1min 1 min + 1min + 1min +

1 1 1 1 1 1 2

3 3 3 3 3 2 4

2 2 2 2 2 2 3 Please rank the authentication methods of a financial app - - - - -5 - - based on frequency? 1= most - - - - -4 - 1 frequently used SMS OTP - two step SMS OTP - SMS OTP SMS OTP SMS OTP - SMS OTP NemID authenticatio two step - two step - two step two step n

Y Y Y Y Y Y Y Willingness to share personal data with merchant i.e. to send only if they only if they only if they see the see the Y Y Y Y electronic receipt or create see the need membership need need

Would an average consumer N N N Y N N N share these data points if asked? Y/N only if they only if they only if they see the see the Y Y Y Y see the need need need

Willingness to share personal Y Y Y Y Y Y Y data with Klarna

Appendix C:5(12)

Would an average consumer Y Y Y Y Y Y Y share these data points if asked? Y/N Only when N N N Y Y N buying with PL or SI

Y Y Y Y Y Y Y

Finns are in We do not general have the quite credit concept of averse, but traditional the younger credit cards, generation also reverse Not so Danes are is more to the We do not We have used to more used credit savvy View concept of have the the credit to the than the traditional credit concept of traditional cards. Dankort, older due to credit as provided by traditional concept of They might which is the increased old and Klarna. Most credit cards, credit have a national online What is an average 25 year old slow. Pay credit cards also mostly cards in debit card. debit card shopping consumer’s attitude to credit? in three in Germany reverse to CH, but the But open of where has are tied to the concept acceptanc to new Denmark. credit card received your bank of credit e of credit concept Traditional usage is good account, and provided by is quite like buy credit is not considered acceptance they will Klarna. low. now pay widely extra automatically later accepted safety. be drawn Combinatio after 30 days n with no debit+credit added cards are interest. very popular.

Estimate how many people have used payment in a store which satispay 1 1 1 1 2 1 involved scanning or showing a 2-3 QR

Appendix C:6(12)

FINMA Finanstilsyn BaFin (The FMA - (Swiss et Federal Financial FIN-FSA Which organizations control Financial Banco de Bank of (Financial Financial Market (Finanssival these regulations? Market España Italy Supervisory Supervisory Authority vonta) Supervisor Authority of Authority) Austria y Authority) Denmark)

How common is it for a typical 25 year old shopper to research, compare prices before buying? 4 3 3 4 5 4-5 4 (ex. a pair of headphones for 100 euros) How often would a typical 25 year old shopper be influenced by someone else in what they 4 4 4 4 3 4 4 choose to buy (friends or social influencers)

5 5 5 5 5 5 5

5 in city/3 5 in city/3 Estimate how many merchants 4 4 5 5 5 in rural in rural that provide these payment methods in store? 5 in city/3 5 in city/3 4 4 4 5 5 1 = barely any in rural in rural 2 = not so many 3 = about half 1 2 2 1 3 3 2 4 = majority 5 = almost all food vouchers, lunch lunch invoice invoice invoice invoice loyalty voucher voucher points

5 5 5 3 5 3 2 Estimate how many consumers use the following payment 4 4 4 4/5 5 5 5 methods in store? 1 = barely anyone 2 3 3 4/5 5 4 4 2 = not so many 3 = about half 1 1 1 1 3 1 1 4 = majority 5 = almost all 1 1 1 1 - - 3

What method would consumers 1 2 2 3 3 3 3 like to pay with if the store is 2 1 1 1 2 1 1

Appendix C:7(12) offering the following payment 3 3 3 2 1 2 2 methods? Please rank them, 1 = first choice 4 4 4 4 4 4 4 5 5 5 5 - 5 5

Appendix C:8(12)

Survey results - Part III

QUESTION NO SE FR NL PL Please estimate how many adults use mobile banking apps (as opposed to telephone 5 4 3/4 4 4 banking or banking in a physical branch or internet banking on the desktop) How much time is 5-15 sec 15-30 sec 5 sec 5 sec 20 sec acceptable for consumers to complete the payment in-store? 30s-1min 1 min + 30 sec 5 sec 20 sec

Choose from... 5 seconds or 15 seconds or 30 seconds or 1 30s-1min 1 min + 1 min + 1 min + up to 10 min minute or longer 2 2 1 1 1

4 4 2 3 4

3 3 3 2 3

Please rank the - - 4 - 2 authentication methods 1 1 5 - 5 of a financial app based on frequency? 1= most SMS OTP. frequently used very popular, even more SMS OTP - SMS/email SMS OTP - - than two step OTP two step passcode, push notice on phone Willingness to share personal data with Y Y Y Y Y merchant i.e. to send electronic receipt or create membership Y Y Y N Y

Would an average consumer share these N Y N N N data points if asked? Y/N

Appendix C:9(12)

Y Y Y Y Y

Willingness to share personal data with Y Y Y Y Y Klarna

Would an average Y Y N N N. PESEL Y consumer share these data points if asked? Y/N

Y Y Y Y Y

Most Norwegian adults own a credit card, and credit acceptance at merchants We dislike They see the - No used to is very high. I traditional Not used to benefits but credit on a would say credit, but the credit cards also are wary daily basis credit is very non regulated because the What is an average 25 of the risks of (debit cards integrated to credit like buy country is not year old consumer’s taking on are used in Norwegian now, pay later card heavy. attitude to credit? credit. I France) shopping is accepted Negative would say - Looking at culture, especially in connection to neutral in fine prints all however younger credit general the time Norwegian generations. are adverse to expensive debt and consider revolving taboo.

Estimate how many people have used payment in a store which 3 2 1/2 1 2 involved scanning or showing a QR

Appendix C:10(12)

FI ACPR Financial (Finansinspe AFM Which organizations (Autorité de KNF -Komisja Supervisory ktionen/finan (Autoriteit control these contrôle NAdzoru Authority of cial Financiële regulations? prudentiel et Finansowego Norway supervisory Markten) de résolution) authority)

How common is it for a typical 25 year old shopper to research, compare prices before 4 4 4 4-5 5 buying? (ex. a pair of headphones for 100 euros) How often would a typical 25 year old shopper be influenced by someone else in what 4 3-4 4 4 5 they choose to buy (friends or social influencers)

4 4 5 3-4 5 Estimate how many merchants that provide 5 5 4 5 - not credit 4 these payment methods in store? 1 = barely any 4 3 4 5 4 2 = not so many 3 = about half 3 2 2 1-0 1 4 = majority 5 = almost all Invoice food voucher - - blik 3

Estimate how many 1 1 3 1 2 consumers use the following payment 5 5 5 3 4 methods in store? 1 = barely anyone 2 1 2 3 2 2 = not so many 3 = about half 2 2 1 0 1 4 = majority 5 = almost all 1 2 - - blik 3

What method would 4 2 2 3 3

Appendix C:11(12) consumers like to pay 1 1 1 1 1 with if the store is offering the following 2 4 3 2 4 payment methods? 3 3 4 - 5 Please rank them, 1 = first choice 5 5 - - blik 2

Appendix C:12(12)

TRITA -ITM-EX 2021:475