A tender subject: what’s the cost of Sweden’s cashless society?
Hard cash is becoming obsolete in Sweden. As digital payment methods replace physical coins and banknotes as the preferred forms of tender, pro-cash protesters worry that a country that only accepts digital payments could have a serious impact on some.
Sweden is an excellent place to find yourself without any small change for the meter. That’s because that meter will probably only accept card payments. In a survey this year by Sveriges Riksbank, comparative data showed that just 61% percent of those questioned said that they had used cash to pay for anything in the last month — down from the 87% who did in 2014.
With the apparent cultural shift from cash usage to digital payment in Sweden, a pocketful of coins can actually be problematic when you want to buy a coffee or — excuse the pun — spend a penny. Without a bank card, you may find yourself struggling to purchase a drink in a bar or to access some of the public toilets in the country’s bus and train stations which are installed — exclusively — with contactless card payment machines. From designer stores to humble yard sales, digital payment isn’t just one way to pay, it’s often the only way, as increasing numbers of service vendors and even major banks now refuse to accept hard cash.
From shells to Swish: the evolution of money
It’s hard to imagine a world without a cash-for-goods structure in place. The modern currency system as we know it was born out of bartering, when traders would place a set value on their commodities (such as livestock and produce) in exchange for other traders’ goods. This evolved into coinage; from cowrie shells used around coastal areas of the Indian Ocean circa 1200 BC to the first coin-currency system touted in the ancient kingdom of Lydia (modern-day Turkey) around 600 BC.
Next came paper. A mere millennia after coinage emerged, it dawned on mankind that hauling a bag of metal pieces everywhere wasn’t the most agreeable form of tender. Unsurprisingly, it was the convenience-thirsty Swedes who had championed the idea of a central bank printing banknotes in the mid-1600s. Fast-forward to the 20th century and the format of currency was redefined again when a forerunner of the modern-day credit card, ‘Charg-it’, was created by US inventor John Biggins in 1946.
In today’s Sweden, a homegrown payment platform called Swish remains one of the most popular choices, since it’s widely accepted and can be linked to individuals’ bank accounts by smartphone. As of May 2017, Swish announced that had around 5.5 million users — more than half of Sweden’s population.
The Pushback
While the numbers suggest that the majority of Swedes are now comfortably adapting to the idea of everyday transactions switching from physical money to card and mobile payments, some remain unconvinced.
One such group not welcoming the change are the Pensionärernas Riksorganisation (PRO)– literally translated — ‘National Pensioners Organization’ — a civil rights organization representing older Swedish citizens. Among other reasons, PRO state their concerns that a societal shift towards digital excludes many older people who may not possess the same tech-savviness as their Gen X and Millennial counterparts. In 2016, a group of PRO-testers handed Swedish Finance minister Per Boland a petition with a considerable 139,064 signatures in favor of keeping physical money and in doing so, highlighting the extent of those who fear the consequences of a cashless utopia.
Unlike the all-or-nothing approach of their opposition, the “pro-cash” campaigners are apparently not on a mission to deconstruct the impressive availability of digital payment options in the country. After all, the Riksbank’s survey speaks for itself: debit card unanimously remains the most popular method of payment among all age groups aged between 18–84. The real argument it seems, is about defending the option to retain hard cash alongside digital forms of payment, on the grounds that this isn’t just a matter of inclusivity; it’s a sensible precaution against the dangers of relying on an entirely online currency system.
With two groups in such strong disagreement, you may wonder: what are the arguments for and against eradicating physical currency?
Cash: the case for dropping it
1. It physically exists.
Very simply, the vulnerability of physical money, is that’s it’s a tangible entity. That means it’s prone to loss, damage and the occasional money changeover (replacing old coins and notes with new tender), all of which account for millions of coins and notes going out of circulation every year. In order to keep inflation rates stable, the government must produce enough new money annually to account for this loss or else risk economic disaster. Which leads to the next point…
2. It costs money to produce money.
In a cashless society, governments would potentially save millions in taxpayers’ cash without the expense of minting coins and printing notes. (All the more pennies towards public services like schools and road repairs, right?)
3. It costs money to store money.
Who’d have thought that money could be an inconvenience to banks? Holding hard cash in a bank branch costs valuable resources, retail space, and ironically, cash. Vaults, security, admin, personnel, electricity bills… the costs all add up. And more often than not, those costs end up getting passed back to the consumer one way or another.
4. Less crime.
Along with removing the danger to individuals of ATM theft and home break-ins (the latter of which led none other than ABBA’s Björn Ulvaeus to step forward as a pro-cashless activist), banks and financial holding places would be safer without cash, too.
Physical theft and heists could be deterred in a cash-free world, as thieves would struggle to sell stolen valuables via traceable online transactions. Furthermore, an absence of banknotes would prevent the practice of money laundering that previously allowed criminals to spend stolen money.
Cash: the case for keeping it
1. It physically exists.
Picture a doomsday scenario: the power grid is down; your smartphone isn’t getting a signal; and you certainly don’t have access to that money of yours floating about in The Cloud. Suddenly your old friends — coins and banknotes — don’t seem like such a bad idea anymore?
Under slightly less dramatic circumstances (such as your bank experiencing temporary technical issues affecting its ability to deliver services, or losing your bank card/PIN number), this is precisely the moment in which a nation’s dependence on electronic currency would be most problematic.
2. Some members of society don’t qualify.
What a cash-free society fails to account for, is that some people would be inherently screwed in the event of a card-only world. Much like the elderly who may experience difficulties getting online or accessing smartphone banking, very young children who are unlikely to have the responsible faculties to own and manage an account with bank card, but nevertheless might occasionally wish to handle small amounts of money for candies and playground bartering (… Pogs, anyone?) would also stand to lose out.
More seriously is the impact the change could have on the homeless and destitute. With many contactless payment forms requiring access to smartphone apps in order to use them and a fixed address with which the user needs to register their account and for shipping, those living under the radar may find themselves in an increasingly desperate position.
3. Tourism.
Following a well-meaning trip to the ATM, many visitors to Sweden are surprised by the apparent worthlessness of the money in their wallets when they try to spend it at restaurants and stores. Since standard bank charges for withdrawals and transactions can make constant card payments an inconvenient and costly way to spend money on holiday, tourists have traditionally opted to use cash as a way minimize these foreign currency buying costs, by withdrawing large amounts at one time. The knock-on effect in a card-only country could be a drop in the economic revenue that tourism supplies.
(Of course, bank fees abroad are no concern for N26 Black account customers, who get unlimited free ATM withdrawals and no-fees on foreign transactions, along with Mastercard’s best currency exchange rate.)
No Money… Mo’ Problems?
In spite of Sweden’s lightning-fast digital payment uptake, the concerns raised by pro-cash organizations aren’t exclusive to marginalized user-groups. Adrian Drott, a 26-year-old video game designer from Gothenburg, is one such millennial-age citizen who sees sense in the dual-tender argument. “I love the convenience of being able to pay with card for everything”, he says, with a roll-up cigarette in hand and a 90 kr (€9) beer close by, both of which were purchased moments earlier by contactless debit card. “But I find the idea of cashless society a bit terrifying. It makes sense to have both in case of emergencies.”
And it seems he’s not the only one worried about having a backup plan. In June this year, the government’s Riksbank committee stepped in to the debate, by drawing up a report that would recommend making it compulsory for the biggest high-street banks to uphold physical money handling services across the country, in a bid to combat the worryingly fast decline of cash availability that may impact on the vulnerable, elderly and those living in rural areas. The move has been met by incredulity from members of the Swedish Bankers’ Association, who argue that introducing laws which stipulate the services banks must provide constitutes a breach of their EU rights, in that only some banks would be subject to it whereas others would be given an unfair advantage.
Stopping money going out of cash-ion
For now, Sweden continues to straddle a (mostly) cashless void, somewhat happily. Mobile and digital payments offer the most convenience and for now, their domination hasn’t presented too many problems for the majority. But even as a 100% digital bank, we at N26 know that sometimes life calls for cash-in-hand situations. That’s why our customers in Germany and Austria can take advantage of Cash26 for cash withdrawals and deposits, simply by visiting one of the many participating supermarkets and stores.
As the pro-cash groups and the Riksbank’s parliamentary intervention demonstrate, the changes in Sweden might be happening a little too hard and fast for comfort. Without solutions to address what happens to those who fall between the cracks, it seems unlikely that a total shift will come into 100% effect until all factions of society are in complete agreement about the benefits of going cash-free… unfortunately, that won’t make it any easier to use public toilets without a debit card in the meantime.
