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Sweden on course to be first cashless country

21 October 2015  |  16774 views  |  15 suits and phones

Sweden is on track to becoming the world's first cashless society, thanks to the country's embrace of IT, as well as a crackdown on organised crime and terror, according to a study from Stockholm's KTH Royal Institute of Technology.

Niklas Arvidsson, a researcher in industrial economics and management at KTH, says that the widespread and growing embrace of the mobile P2P payment system, Swish, is helping hasten the day when Sweden replaces cash altogether.

"Cash is still an important means of payment in many countries' markets, but that no longer applies here in Sweden," Arvidsson says. "Our use of cash is small, and it's decreasing rapidly."

In a country where bank cards are routinely used for even the smallest purchases, there are less than 80 billion Swedish crowns in circulation (about EUR8 billion), a sharp decline from just six years ago, when the total in circulation was SEK106 billion.

"And out of that amount, only somewhere between 40 and 60 percent is actually in regular circulation," he says. The rest is socked away in people's homes and bank deposit boxes, or can be found circulating in the underground economy.

The result of collaboration between major Swedish and Danish banks, Swish is a direct payment app that is used for transactions between individuals, in real time.

But if Swish starts to be used on a larger scale and grows to include retail transactions and e-commerce, Arvidsson says the prospect of a cashless future will come ever closer to reality.

Sweden will still have to ensure that all people are able to participate in a cashless payment system, Arvidsson acknowledges. The transformation would present serious challenges for those who are unfamiliar with computers and mobile phones — mainly older people living in rural areas.

Other segments of the population likely to feel the impact are the homeless and undocumented immigrants.

Comments: (15)

Hitesh Thakkar
Hitesh Thakkar - FIS Payments Software and Services India - India | 21 October, 2015, 12:18

The figures from study shows that 40% of Euro 8 billion is underground economy ( assume we take lower side).

Is it effect of migration of cashless society creating it as part of progression? is it that AML controls are questionable in the country?

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A Finextra member
A Finextra member | 21 October, 2015, 14:41

I am sure FinExtra supported the notion that Denmark would become the first cashless country - at an event just two weeks ago, in Denmark.

Both countries are to be applauded but I am wondering what happens when a visitor arrives in either country with a bag full of notes and doesn’t have an iPhone 6 for ApplePay or a credit or debit card etc.

It reminds me of this morning - trying to pay for a breakfast sandwich in London, only to be told be the retailer that I would be surcharged 50p as the "cost of cards was too high". So he kept the £3.50 sandwich and I went next door to Pret. 

 

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Bo Harald
Bo Harald - ZEF and Real Time Economy Program - Helsinki region | 21 October, 2015, 16:59

Finland actually has the lowest usage of cash today. But Denmark and Sweden seem to be determined to take the lead. On EUlevel the cost of cash to merchants was calculated to be 50bn€/year. How much is paid to card acquires I do not know - but guestimate less than 1/10th.. Of course the consumer would then stand to gain some 45 billion every year... subject to competitive retail markets...

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A Finextra member
A Finextra member | 21 October, 2015, 16:59

Dear Mr Thakkar,

The AML controls in Sweden are up to the highest EU standards but the underground cash never meets these controls since it does not attempt to land in bank accounts but goes from hand to hand. Sweden is now changing the bills and coins - this will force the underground cash to surface at least in merchant outlets since the old bills will become void in a short while. Most bank branches are already cash free sales offices and do not accept cash deposits, instead customers use deposit machines... with AML restrictions. It is today much easier to find a merchant that does not accept cash than to find one that does not accept MasterCard or Visa. Mobile phone stores, parking meters, commuter busses, conveniency stores, hospitals, physicians, dentists are among the early adoptor cashless service providers. And do bring your mobile phone - the payphones died out years ago.

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Bo Harald
Bo Harald - ZEF and Real Time Economy Program - Helsinki region | 21 October, 2015, 17:09

Branch offices handling cash is close to being an exemption in the Nordics. Cash withdrawals at POS is an alternative - as ATM-networks are thinning out..

 

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Bo Harald
Bo Harald - ZEF and Real Time Economy Program - Helsinki region | 21 October, 2015, 18:08

Cash is an open invitation to crime - in so many dimensions..

 

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Hitesh Thakkar
Hitesh Thakkar - FIS Payments Software and Services India - India | 21 October, 2015, 19:17

@ A Finextra member - Thanks for sharing best practices. It's insightful.

@BO - In India we have seen POS txn cash withdrawal starting to gain in trend. What are the ways ATM network in Nordic build their business? 

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Bo Harald
Bo Harald - ZEF and Real Time Economy Program - Helsinki region | 21 October, 2015, 21:07

ATMs aree owned by the banks and not seen as business - just a way to get customers out of the branches originally - now numbers of ATMs declining fast at least in Finland as cash usage is so low.

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Vishwanath Thanalapatti
Vishwanath Thanalapatti - Risk Management Professional - Toronto, Canada | 23 October, 2015, 18:59

Just as phtograph films faded and now memory remains, cash dispensing (ATM) , cash counting, cash accepting (pay phones) machines will be a thing of past. It is a question of time when the displacement will occur. May be longer in Asia, certainily faster in progressive smaller countries.  We live in a digital world and must look forward to the evolution of digitisation around us.  

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Neil Burton
Neil Burton - Verifone - London | 24 October, 2015, 10:07

The real driver of cashless across The Nordics - which has always led the way in electronic payments globally - is, as the article says, 'bank cards are routinely used for even the smallest purchases'. 'Bank cards are routinely used for even the smallest purchases...card share of non-card trns climbed to 62.8%' says the World Payments Report 2015.

My colleagues in the Nordics rarely carry cash; some restaurants won't accept it. That's the 'new normal'.

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Neil Burton
Neil Burton - Verifone - London | 24 October, 2015, 10:16

Apologies, misquoted WPR - corrected below 

The real driver of cashless across The Nordics - which has always led the way in electronic payments globally - is, as the article says, 'bank cards are routinely used for even the smallest purchases'. 'Globally card transactions led growth and increased their share of the non-cash market...card share of non-card trns climbed to 62.8%' says the World Payments Report 2015.

My colleagues in the Nordics rarely carry cash; some restaurants won't accept it. That's the 'new normal'

 

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James Bell
James Bell - IBM UK LTD - London | 26 October, 2015, 10:54

Any thoughts on why it is a different story in the UK? http://www.finextra.com/news/fullstory.aspx?newsitemid=27850

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A Finextra member
A Finextra member | 26 October, 2015, 16:28

Sweden different to UK: A long story since the 1970ies: The number of unbankedlower, the number of cardless lower, the size of the grey or black economy smaller, the rate of merchant accepting cards higher, GBP a sanctuary currency in many Commonwealth countries hiking the UK issued cash volume which is not the case for SEK, the size of the rate of population that uses virtual banking services higher, high-speed internet connections by wire and wireless availability higher, card issuers and acquirers agreeing with the merchants; merchant staff trade unions; police, tax authorities; that cards are more effective and safer than cash, cost of labour for cash handling higher, banks moving away from merchant cash deposits, ATM:s fewer...In Sweden even homeless people have smart phones and cards and this means that the difference between the Haves and Have Nots is not that big in Sweden due to the tax system and social benefits construction. More or less everybody can afford to be on board.  All this is easier to reach is a 10 million country with a reasonably homogenious population.  

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Neil Burton
Neil Burton - Verifone - London | 27 October, 2015, 15:37

James - it's a good q, to which I don't think there's an obvious answer - interested in others' views.

I sometimes wonder if there's an optimum market size for innovation. An industry expert once mused 'about the only thing interesting about the US payments market is it's big'.

Incumbent highly-adopted schemes certainly seem to set a high barrier for innovators to jump; the new alternative not only has to be better, it has to be better for a large number of disparate people, quickly (before the incumbent reacts). Much easier to do in consumer goods (eg Apple) than a deeply-connected business like payments. But get it right, and....

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Bo Harald
Bo Harald - ZEF and Real Time Economy Program - Helsinki region | 27 October, 2015, 15:46

When you build ecosystems where you need many participants and the public sector it is easier in a small country - especially if there is a strong standardization tradition (Finland). But if you on your own sell innovative apps domestically for smaller segments it is very difficult to get critical mass - so America is better here.

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