Sweden is set to become the first cashless society in the world, researchers report, crediting the shift towards electronic-only transactions to a new mobile payment system called Swish, which facilitates real-time deposits with no minimum spend.
"Cash is still an important means of payment in many countries' markets, but that no longer applies here in Sweden," says Niklas Arvidsson from Stockholm's KTH Royal Institute of Technology. "Our use of cash is small, and it's decreasing rapidly."
Right now, there's less than 80 billion Swedish crowns in circulation (about EUR8 billion) and Arvidsson says out of that, only 40 to 60 percent is actually still in regular circulation. The remainder has been buried in people’s backyards, in their sock drawers, or is being used for criminal activity. To give you an idea of how quickly the Swedes are rejecting cash, just six years ago, that figure was up around SEK106 billion.
There are a couple of main factors that appear to have contributed to Sweden’s rapid swift towards electronic-only transactions. Not only have businesses done away with the 'minimum spend' rule when it comes to EFTPOS and credit card transactions, but there’s been a huge uptake of mobile app called Swish, which is the result of a collaboration between several major Swedish and Danish banks.
The app allows for real-time transactions to take place, with users able to transfer money straight from their bank account to anyone else with a bank account, whether they’re at a restaurant, in a cab, or at the flea market. According to Arvidsson, the Swedes love Swish so much, it’s already revolutionising the local banking system, with several major banks refusing to accept cash at all, and as of late last year, four out of every five purchases in the country were being made electronically.
"Swedes are pretty trusting and we’re used to embracing new technology so this was the perfect solution," Pia Stolt from Situation Stockholm, a local street paper sold by homeless vendors that made itself Swish-friendly early on, told The Guardian late last year. "The cashless society campaign we’re seeing in Sweden is definitely a good move as far as we are concerned - it’s unstoppable."
The other factor at play is the country’s crackdown on money laundering and organised crime, which has set so many guidelines in place about cash use, most people just opt for Swish or bank cards.
"At the offices which do handle banknotes and coins, the customer must explain where the cash comes from, according to the regulations aimed at money laundering and terrorist financing," says Arvidsson, adding that if any cash transactions are considered 'suspicious' by bank staff, they're required to file a police report.
"In general, the rule of thumb in Scandinavia is: 'If you have to pay in cash, something is wrong,'" writes Mikael Krogerus for Credit Suisse.
While Sweden is closer than any other country on Earth towards the goal of cashlessness, there are some major challenges to overcome first. Besides a possible uptick in cybercriminals trying to access bank servers and parents having to figure out how to responsibly give their 10-year-old child access to a debit card, pensioners who are unfamiliar with the technology, and those who don’t have access to it will continue to use cash in the near future, and cannot be discriminated against for doing so. Arvidsson points to a recent survey that showed two-thirds of Swedes think carrying cash is a human right, whether or not they actually want to do it.
"We like having our own currency and it fits in with the identity of being a Swede; we’re even releasing new banknotes in 2015," he told Helen Russell at The Guardian. "So people like to know their cash is there, even if they don’t necessarily use it."