EXCLUSIVE: “Rewarding Loyalty” – Kai Lindström, S Group in ‘The Paytech Magazine’

Finland’s S Group is proud that shoppers still want to spend so much time inside its co-operatively owned retail stores. But it knows those baskets will inevitably be filled remotely in the future

When Finland broke free from the yoke of the Russian tsars in the late 19th century, it was the new cooperative movement that helped build an independent economy.

So deep is the idea of the collective in the country’s cultural heritage that even today around 80 per cent of Finns are members of a co-operative of one sort or another. S Group, one of the biggest and most successful companies in Finland, is owned by its circa 2.5 million members.

That’s an extraordinary number when you consider that the country’s population is fewer than six million. Its network represents 47 per cent of the country’s grocery market and touches 78 per cent of households in some way – through supermarkets, petrol forecourts and EV charging stations, department stores, car dealerships, its own banking network… there’s even a theme park.

S Group employs 41,000 people at its 1,984 business locations, and in 2023 its annual revenue totalled €13.5billion. Through two world wars and a domestic civil war, S Group has been a constant in Finnish life. It inspires loyalty – and it rewards it, with members receiving five per cent cashback on their purchases, via its green bonus cards.

In fact, 2023 saw it returning €484million, or an average of €194 per person. Its main contact point with members – the way it gets to know them best – is through the payments they make across its many diverse enterprises. Improving how it handles those transactions and, crucially, how it derives the best information about customers from them, led the company to build its own payments orchestration layer – an unusual step for a multiple retailer.

The significant data this system collects from the 500 million or so transactions the Group handles daily enhances customers’ overall experience by giving them insights such as their purchase history, food nutritional values and environmental impact. The halo effect from this, S Group says, has driven a 14 per cent revenue increase.

Trust and technology

S Group’s enviably close relationship with its customers is evident from its 98 per cent in-store, in-person payment transaction record. But it hopes to move this dial ahead of a predicted countrywide shift from card spending and mobile-based transactions to a greater ratio of other digitally-enabled payments as generational differences come into play.

The Group’s Vice President of Payments, Kai Lindström, explains that Finland – like much of the Nordic region – probably did too good a job of telling people to protect their financial information from digital predators, making several generations reluctant to use more innovative payment methods. Currently, 84 per cent of transactions are executed by cards, 90 per cent of those debit cards. The majority of the other online payments the population make are executed via bank links.

The challenge is how to make that online customer journey and experience as good as it is in-store”

“Mobile wallet payments are starting to gain ground but not that much yet, maybe making up six or seven per cent of all transactions,” explains Lindström. “MobilePay, the Danish mobile wallet, is really popular for person-to-person payments and, on the e-comm side, bank links are. But there are historical reasons why people are cautious. Back in the late 90s, when the internet was new, banks were warning consumers not to add their card details into retailer sites in case someone stole them. People remember that and that’s why they favour bank links.

“I guess the banks regret that now because their move to protect the consumer has ultimately impinged o innovation by impacting demand, and they don’t get interchange fees from the bank link method. However, I do think that is changing now.”

To complement its own in-house orchestration and help it along its journey towards offering a more seamless omnichannel experience for customers, S Group partnered with global payments technology platform Adyen in 2023.

“Our common goal is to provide S Group’s customers, across our brand portfolio, with easy, safe and dependable ways to pay, and innovative, value-added services, too,” says Lindström. “As well as new payment terminals, our customers will notice the change in new payment methods within our sales channels.”

One of the partnership’s primary objectives is enabling the benefits of its loyalty scheme – currently embedded within its own payment card via its orchestration layer – to be extended to other payment methods, such as Apple Pay.

“If we enable Apple Pay, our customers will automatically expect their loyalty points to come with it,” says Lindström. The problem was they wouldn’t. “These were the kinds of hindrances that led us to build our own orchestration layer and we need to continue to overcome them as we look at all our payment process solutions.”

The ultimate goal is to ensure that the physical and increasingly digital shopping experiences it plans to offer its customers, work seamlessly together.

“So, while 98 per cent of our sales volume at the moment is coming from in-store, we want to put effort into e-commerce and increase that tenfold over the next three or four years,” Lindström says.

A very visual indication of that intent is the fleet of home delivery robots that beat a path to customers’ doors from 100 of its stores.

“The challenge is how to make that online customer journey and experience as good as it is in-store, while resolving issues like not being able to pay with all the payment methods in our app for car fuelling and charging. We are looking at optimising these payment methods and journeys so that customers don’t always have to complete strong customer authentication to pay. We hope Adyen can help us achieve this.

“We’re also getting ideas from things we see our peers introducing successfully in other Nordic countries, such as scan-and-pay applications, which are blurring the lines between e-comm and in-store as customers shop in store but pay online.”

Being able to better capitalise on customer trends data to fuel the success of S Group’s loyalty scheme is an important by-product of this digitisation process, especially since the universal adoption of ISO 20022 enables more granular payment details to be captured.

“This data will bring much more information and, because it will be in a standard format, we can use it, with the help of our different partners, to gain more insights,” says Lindström. “We are sitting on top of a huge amount that we’re not currently using to maximum benefit.”

This article was published in The Paytech Magazine Issue 16, Page 16-17