When we talk about the advent of a cashless society, Sweden is one of the countries that should come to mind first. Indeed, Sweden has always been at the forefront of technological progress. Sweden's culture of innovation coupled with the nation's high-quality of life have played a paramount role in the transition to alternative payment methods. But, if the society is becoming more and more paperless, cash will not disappear completely.
“No cash accepted”, “Cash free zone” are signs you can read in many shops in Sweden.
The Nordic country is widely regarded as the most cashless society of the planet and most of the country’s bank branches have stopped handling cash. Many shops, museums and restaurants now only accept cards or mobile payments and this evolution started well before the Covid crisis, it only accentuated this trend.
In ten years, the proportion of people in Sweden paying with cash has fallen from around 40% to less than 10%. Cash is now mostly used for small payments and primarily by older people (Riksbank, Sweden’s central bank, October 2020).
For payments below 100 Swedish kronor (1 euro is worth around 10 kronor), the share of people who used cash declined from 59% in 2010 down to 12% in 2020. For payments above 500 Swedish kronor, the share decreased by two percentage point from a use of 5% in 2018, to 3% in 2020. During the same period, the use of debit cards for payments in shops increased for each period for payments below 100 Swedish kronor until 2018, and then stayed at 71% in 2020.
Apart from Sweden, it is only in Norway that the amount of cash in circulation has fallen over the last ten years. For Sweden, this may be due to measures making cash less attractive being introduced at about the same time as the app Swish (read below) was emerging as a convenient alternative to cash. The app has come to strengthen a movement already well underway by the widespread use of the bank card.
Swish, the app that became a verb
Over the last decade, a number of technology companies have become established on the payment market in Sweden. Several of these have introduced new, convenient ways of paying and have thus helped make payments in Sweden easier and more secure. The FinTech sector in Sweden is well placed from an international perspective. The reasons for this are that the digital infrastructure is well-developed and that IT know-how among the population is strong.
The symbol of this evolution is Swish, an app that became a verb: “Can I swish?”
You can tell that something has become part of the culture when it enters the day-to-day language. The verb “swisha” (“to swish”) is the perfect example. The service was launched in 2012 by six of the largest Swedish banks (other banks have since connect to Swish), in cooperation with the Riksbank. It had 7.9 million users in April 2021 (total Swedish population: 10.2 million).
The service works through a smartphone application, through which the user's phone number is connected to their bank account, and which makes it possible to transfer money in real time, a few seconds until confirmation is received by both parties. The user must have a second mobile application called Mobilt BankID Säkerhetsapp, which is an electronic identification issued by several banks in Sweden. This requires that the user has a bank account in a Swedish bank participating in the system, and also a national ID number.
Recently some cafés, shops and supermarkets have started to display QR codes that customers can scan to pay directly by using their phones.
Today, the easiest way to enter the Swedish society consists in using the BankID app, that allows anyone to access all digital public services, use online banking and even sign contracts.
The Riksbank is investigating whether it is possible to issue a digital complement to cash, a so-called e-krona, a central bank digital currency (CBDC). Just like cash, the e-krona would be issued by the Riksbank and be available for the general public. At yet no decision has been taken to issue an e-krona.
The Riksbank started the e-krona project in 2017. In 2020, Sweden’s central bank entered into a more practical phase. To test how an e-krona might look and function, the Riksbank started a project, the e-krona pilot, together with the company Accenture, to construct a possible technical platform for the e-krona.
A number of issues
“Some groups in society find it difficult to cope without cash. For example, over half of all people over 65 state that they are negative towards the decline in cash usage. It is the Riksbank’s opinion that those who want to use cash should be able to continue to do so. It is also necessary that payments in Sweden can continue to function in times of crisis and heightened alert”, stated the Riksbank in its study “Payments in Sweden in 2020”.
A cashless society indeed raises a number of issues. A popular reaction movement, named “Kontantupproret”, for “cash uprising”, has argued since 2015 that electronic payments are not suitable for the elderly, the visually impaired, or even immigrants, and that it participates in the exclusion of these populations. Others have warned of the risks of paralysis of Swedish society in the event of a cyberattack or a general power failure. The Riksbank itself began to question this development in 2017, the launch of the e-krona can be seen as a way to keep control over payments.
And the political class seized on the issue. On January 1, 2021, an amendment to the Swedish Act on Payment Services requiring banks to provide access to cash services entered into force. The amendment stipulates as follows: “Such credit institutions and branches of foreign credit institutions that supply customers with payment accounts that include basic functions must provide services that make it possible to withdraw cash from these accounts (places for cash withdrawal) to an adequate extent throughout the country.” Meaning “more than 0.3% of the population (about 30,000 persons in 2017) shall have farther than 25 kilometers to a place for cash withdrawal and no more than 1.22% of the population (about 122,000 persons in 2017) shall have farther than 25 kilometers to the closest place for daily cash deposits to their bank account”.
However, it is still legal for a shop to refuse cash: “Businesses and shops are not required to accept cash because the refusal to accept cash or credit cards is within the contractual freedom between businesses and consumers, whereas government entities must accept cash.”
But the issues about a cashless society go beyond social considerations. In February 2018, the president of the Riksbank was moved by the fact that the national payment system was gradually becoming the monopoly of the private banking sector. Stefan Ingves in fact called for "a new legislation guaranteeing public control of the payment system, affirming that being able to make and receive payments is a 'collective good' in the same way as Defence, courts or public statistics" (The Guardian). “Most citizens felt uncomfortable with the idea of entrusting these social functions to private companies,” he added.
Stefan Ingves also highlighted the exposure of the national payments system to a computer attack, saying: “It should be obvious that Sweden's preparedness would be weakened if, in the event of a serious crisis or war, we had not decided in advance how households and businesses would pay for fuel, supplies and other necessities."
In conclusion, we can say that cash will not totally disappear in Sweden but its existence has become more a political and cultural question whereas it is hardly used any more by citizens or companies. Cash is more a “public good” than a payment method. The society should become less reliant on cash rather than being completely cashless. There is still a need for physical currency.
And to quote the Riksbank: “In Sweden, the transition to cashless payments has not fundamentally affected people’s concepts of money and value.”
[HERE to read more about central bank digital currency]
Article by Nicolas Klein
Publié le 21 juillet 2021