Many people in the Nordic region cross borders regularly, whether to work, shop or visit friends and family. Despite this, sending money between the countries is often expensive and time-consuming.
"The Nordic economies are tightly linked, but that is not sufficiently reflected in cross-border payments," Ulrik Nødgaard, director of Denmark's national bank, said in a press statement.
"There is potential to make it both cheaper and faster to make payments between Nordic countries. Regulation, increased competition and better payment infrastructure can all be important steps in that direction."
It's often cheaper to send money between two Nordic countries in euros rather than in Nordic currencies, despite the fact that Finland is the only Nordic country which uses the euro. This is due to EU rules which limit fees on transactions made in euros. There are no similar rules regulating transactions in Nordic currencies.
As a general rule, a transaction of 1,500 Danish kroner between two Nordic countries would cost less than 1 percent of that amount in fees if carried out in euros, while the same transaction carried out in a Nordic currency can cost between 2 and 7 percent.
The downside of this, however, is that there are practical issues when trying to transfer a specific amount in another Nordic currency when that amount needs to be converted twice – once to euros and again to the final currency.
According to the Danish national bank, factors such as increased competition from new payment providers, such as "neobanks", 100 percent digital banks, could mean these prices become cheaper in the future.
New infrastructure, such as the so-called TIPS Cross Currency System, which allows immediate transfers between Danish kroner, Swedish kronor and euros, could also make transfers cheaper and faster. Banks need to actively sign up to use this system, however.