IMAGE: Riksbanken

Sweden and the cash dilemma

Sweden is rethinking the speed of its evolution toward becoming the world’s first cashless economy amid growing opposition to the disappearance of notes and coins that, according to some, exposes the country to cyberattacks or technical problems, as well as isolating the elderly and other vulnerable sections of society with no access to cards or apps.

Around 80% of financial transactions now take place through cards or electronic devices in the Scandinavian country: children even buy sweets with debit cards, while bars refuse to accept cash because of the costs and other complications it generates. A Swedish payment application, Swish, is so popular that “swishing” is now what most people say when they want to pay for something. Services such as iZettle, recently acquired by PayPal, allow small businesses and merchants to receive electronic payments easily. The amount of cash in circulation has fallen from the equivalent of 97,000 billion euro in 2007 to 7,700 million, reflecting the popularity of electronic payment, although there are many critics.

Proponents of the cashless economy argue that the use of electronic payment reduces crime and the black economy. Opponents say the transition is leaving behind older people in rural areas, while highlighting potential security problems. Many older people are unfamiliar with credit cards or smartphones and find it difficult to manage or measure spending without cash. It’s worth noting that privacy or surveillance are not cited as issues by those against the trend toward a cashless society: the Swedes have long trusted their governments and the country has many transparency laws. The simple reality is that Sweden has found itself alone in the vanguard of doing away with cash, leaving the rest of the world behind.

In response, the government wants banks to offer traditional current accounts and to have more than the equivalent of €8 billion euros in cash, as well as continuing to accept cash payments at branches. Furthermore, 99% of the population must have access to cash, either through ATMs, a branch, or partners providing cashback services within 25 kilometers.

Should a brake be put on the transition to a cashless economy because a tiny minority of the population is unable to manage electronic payment, or because of technical issues that would still be a problem even in traditional cash economies? To what extent do the benefits of less crime and reducing the size of the shadow economy offset these difficulties and risks? Will we ever see a totally cash-free economy, and what timeframe would be reasonable to implement one?

(En español, aquí)