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Why Sweden should fear going cashless

Our report on Sweden becoming a near-cashless society went viral last month. But former Sweden Police Chief and Interpol President Björn Eriksson says there are reasons to be cautious about the concept.

Published: 4 November 2014 11:58 CET
Updated: 4 November 2014 13:58 CET
Why Sweden should fear going cashless
Former Swedish Police Chief Björn Eriksson wants to keep using cash. Photo: Private
"Banks have long been lobbying to remove cash from our communities, and they have come a long way. Four out of five purchases in Sweden are now made electronically or by debit card.
 
But the issue is far too important to be left in the hands of the private sector.
 
The state needs to make sure that people still have the right to use cash.
 
Last week saw Sweden's banks release their accounts and yet again we heard about their big profit wins. Swedbank for example announced a record profit of nearly six billion kronor ($811 million). 
 
One way that banks are trying to cut costs further is to phase out cash. Counter services can be wound down, printing costs are cut. What customers think about this idea is obviously not interesting for the banks, as long as they keep making a profit.
 
It's not just Swedbank pushing the idea of a cashless society, but also Nordea, SEB, Danske Bank and card companies Mastercard and Visa.
 
So far their plan has been successful and the banks will tell you that they are helping the environment by cutting cash production costs or decreasing the risk of robbery.
 
 

How much cash do you carry these days? Photo: Shutterstock
 
But little has been said about the major challenges that a cashless society brings. It infringes on people's privacy. It can make life difficult in sparsely populated areas. It can make a society vulnerable and increasingly open to sophisticated internet crimes.
 
How are disadvantaged people who currently exist outside the banking system supposed to survive? What happens to people's privacy when all transactions are traceable?
 
What happens when things go wrong? The Bråvalla music festival in Norrköping was supposed to be cashless this summer, but things descended into chaos when the payment system didn't work.
 
We need a public inquiry to look explicitly at reviewing the public's access to cash.
 
Cash is needed by many companies, associations and individuals in order for society to function.
 
This should be an important priority for Sweden's new Minister for Financial Markets and Consumer Affairs, Per Boland.
 
There must be a guarantee that we can continue to have access to notes and coins and we must be able to trust that our banks will allow this."
 
Björn Eriksson is a former national Police Chief , former President of Interpol and is currently Chairman of the Association of Swedish Private Security Companies
 
Would you like to live in a cashless society? Post your comments below.

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MONEY

How safe is your money in a Swedish bank account?

What protections are there for your money if your bank goes bust? We had a look at the rules in Sweden.

Published: 13 March 2023 16:29 CET
How safe is your money in a Swedish bank account?

US bank Silicon Valley Bank (SVB), a favourite bank to US tech firms and a well-known lender to start-ups, went bust on Friday morning after being hit by a classic bank run, as its clients sought to withdraw $42bn in a single day, a quarter of its deposits. Signature Bank, another American bank, was shut down on Sunday, after suffering a similar bank run on the back of the SVB collapse.

So, what would happen if your Swedish bank went bust? Should you rush to withdraw all your money if your bank looks to be in a precarious situation? Here’s the situation in Sweden.

Deposit guarantee

You may not have realised this when you opened your Swedish bank account, but most bank accounts in Sweden are covered by the government’s insättningsgaranti or deposit guarantee. Simply put, this guarantee means that, if your bank goes bust, the state will foot the bill and refund your money.

Most Swedish banks are signed up to the deposit guarantee, but you can check whether your bank is included on this list.

How much money does it cover?

In 2023, the deposit guarantee is 1,050,000 kronor per person per bank, so you will get all of your savings back if they are under this figure.

Note that this is per bank, so if you have accounts in multiple banks you have a separate deposit guarantee for each bank, meaning your deposit guarantee could cover millions of kronor if you spread it out over more than one bank.

If you have a joint account, you’ll each have an individual deposit guarantee, so a couple sharing an account would be able to get 2,100,000 kronor of savings back if their bank collapsed.

It’s also possible to apply for an extra supplementary amount of up to five million kronor for deposits “coupled to certain life events,” the Swedish National Debt Office explains on its website, if you’ve sold a property, received a damages payout from a court case, or an insurance payout, for example. This can’t be applied for until you’re in a situation where a payout is due. 

The guarantee applies to all private individuals (including children), as well as companies and other so-called “legal individuals”, such as the estates of deceased people, and it applies independently of any debts or loans you have with the bank in question.

Banks, municipalities, regions and government authorities are not covered by the guarantee.

How is it funded?

You may be wondering how the state is able to guarantee billions of kronor in the event that a Swedish bank fails. The answer is simple: the deposit guarantee is funded through fees charged to banks and other financial institutes which are then held in a fund.

The Financial Supervisory Authority has the power to decide when the guarantee should come into effect, and it also applies if the Swedish National Debt Office places a bank or other financial institute into administration.

Why does it exist?

The guarantee was originally introduced in the autumn of 1992, which was a turbulent time for the Swedish economy.

In order to stabilise the economy, the government introduced a general state bank guarantee, which in 1996 became a deposit guarantee covering 250,000 kronor per person per bank.

The idea behind the guarantee is to discourage people from withdrawing their money from a bank in crisis, thereby contributing to more stability in the financial system, as customers know they will get their savings back even if the bank eventually goes bust.

During the financial crisis of 2008, the guarantee was increased to 500,000 kronor. 

Since 2010, new EU rules have meant that the deposit guarantee should cover an amount equal to 100,000 euros, with the amount in local currency adjusted every fifth year to match this number.

The last adjustment was in 2021, where the guarantee was raised from 950,000 kronor to 1,050,000 kronor.

How many times have payouts been made?

Payouts have been made three times since the deposit guarantee was introduced in 1992. The first two payouts were in 2006, when two financial institutes, Custodia AB and Almänna Kapital went bust.

In Custodia AB’s case, 1,282 affected customers were reimbursed with a combined 134.2 million kronor, and 287 of Almänna Kapital AB’s customers received a combined total of 40.9 million kronor.

The third payout was in 2010, when Danish bank Capinordic went bust. As this was a Danish bank with a branch in Sweden, the Swedish deposit fund paid the difference between the Swedish guarantee, which was 500,000 kronor at that time, and the Danish guarantee, which was 50,000 euros. This meant that 825 customers received a combined payout of 10.6 million Swedish kronor.

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