Sweden: Where cash will never be king

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Sweden: Where cash will never be king

Could Sweden become one of the first cashless societies in the world? Probably, says a researcher at the Royal Institute of Technology. Here's how, and why.


Sweden recently got a brand new set of bills, sporting historical Swedish heroes and looking better than ever. There's also a new 200 kronor note, whereas before it leaped from 100 to 500.

But the new wave of cash is a little ironic, given that Sweden is well on the way to abolishing cash entirely. So why come out with more of it now?

"The decision to bring new notes was made five years ago," says Niklas Arvidsson, professor at the Royal Institute of Technology who researches cashless society.

He says that there were multiple reasons for renewing the currency, including better security and avoiding counterfeit problems. And despite Sweden's long-lasting love affair with digital payments, Arvidsson says it will probably still be another decade before Sweden is entirely cashless.

But it's already quite close. In Sweden only about 20 percent of store transactions involve cash - compared with 60 to 80 percent in most other countries.

Not even many Swedish banks deal much with cash these days. "Cash carries an increased risk of robbery, and administrative costs," Arvidsson explains. "The banks which do accept cash require that you explain where the cash has come from, to ensure it is not laundered or financing terrorism.”

Read more about the new Swedish bank notes

At this rate, Sweden may become one of the first cashless societies in the world, according to Arvidsson's research. He recently published a paper studying the Swedish electronic payment system Swish - which he says is one of the largest cash-killers.

Sweden was one of the first countries to join the electronic revolution, launching e-bills and payments, electronic bank accounts, and mobile banking.

"Swedish banks are good at joining advanced IT systems early, and in combination with a very strong IT sector, that has led to multiple competitive financial services.”

Swish is the next development, launched in late 2012.

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"Cash is still an important payment method in many countries, but not here in Sweden anymore," he says. Today there is some 80 billion kronor in cash circulating in Sweden - but in 2009 that number was 106 billion. And it continues to drop quickly. "

And only about half of that is circulating regularly," he says.  "The rest is sitting at someone's home or somewhere on the black market." 

In order for a society to truly go cashless, everyone in the society needs to be able to use the new, in this case digital, method. That includes older generations who may not be as familiar with modern technology, as well as those who live on the countryside.

The app Swedish is so simple to use, though, that Arvidsson says it is already conquering the hearts and wallets of cash users.

Another potential challenge of a cashless society faces homeless and paperless migrants: If there is no cash to give, they are (literally) left out in the cold.  But of course there are benefits as well. A digital, cashless society is simpler, more cost-effective, and more open, since transactions are easier to track.

If Swish's popularity continues to grow as quickly as it has, then it could entirely replace cash.

"Swish is like cash in the sense that it is a direct payment which occurs in real-time," Arvidsson elaborates. "The system's biggest strength is how fast and simple it is."

Read also: Sweden close to being a cashless society

Currently most Swish transactions are between private users, but stores and online boutiques are starting to try it out. The infrastructure may have to rebuilt to handle the shift to industrial use, but Arvidsson says it probably won't be a problem.

"Swish is already revolutionizing the entire essence of Swedish banking."

Swish works together with the Swedish bank, Riksbanken, in order to carry out its transactions in real time. And that is a critical aspect of the app's functioning. Without that kind of cooperation it would be impossible - which is why it may be tough to export the Swish model to other nations.

"It's a great idea, but it will take a long time for other countries' bank systems to change from the ground up," he says.  “But if they figure that out, Swish could lead an international revolution.”



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