*The views expressed in this article are solely those of the author and should not be attributed to the European Payments Council.
According to recent figures from industry association UK Finance, one in ten UK adults now live a largely cashless life – in part thanks to the growing acceptance of contactless cards. But this number pales in comparison to Sweden. A 2018 survey by the Sveriges Riksbank, the central bank, showed that four out of ten Swedes had not used cash in the previous month.
The pace at which countries will evolve towards a cashless society will undoubtedly differ, but – given consumer interest in contactless and mobile payments – it will eventually happen. It is therefore high time for policy makers to start work on a roadmap. Not only are there several crucial social choices to be made, if Sweden is the bellwether, the endgame of cash may well be shorter than expected.
Indeed, in Sweden cash usage is declining faster than anyone thought it would. In the Riksbank survey mentioned above, in a mere eight years, between 2010 and 2018, the percentage of respondents who had paid in cash for their most recent purchase declined from 39 to 13 percent. Conversely, while in 2014 only two out of ten had recently used the local Swish mobile payment service, by 2018 this had increased to six out of ten. Looking ahead, in a survey by the Retail and Wholesale Council, half of Swedish retailers predicted they would not accept cash after 2025.
If one combines these observations, the upshot would seem to be that cash usage can reach a tipping point at which merchants realise that they are spending a lot of resources for a small percentage of customers and decide to stop accepting cash altogether, thus rendering cash less useful for consumers, and hastening its demise. Cecilia Skingsley, deputy governor of the Riksbank, has predicted that Sweden may well become cashless in as little as three to five years.
This rate of change has alarmed the central bank, which is concerned that not enough is being done to protect an estimated half million Swedes who are digitally excluded. The Riksbank is therefore trying to step on the brakes. To secure the general public’s access to cash, it has called upon parliament to oblige banks, whose branches have increasingly become cashless, to continue to provide cash services to their customers. In addition, the Riksbank has proposed a review of the concept of legal tender. In a country where retailers are not legally obliged to accept cash, this should be understood as a call to extend the remit of the law beyond public medical care.
Lawmakers elsewhere have been thinking in the same direction. Last March, Philadelphia followed New Jersey in passing a ban on cashless stores (with exceptions for some establishments). More recently, two U.S. Congressmen independently introduced bills – the Cash Should Always Be Honored Act and the Payment Choice Act – that that would install a similar ban at the federal level. In China, where mobile payments have exploded, the central bank last year issued a notice stating that businesses must not discriminate against cash payments.
Interestingly, in Belgium – where the number of card payments per head is half that in Sweden – a bill has been introduced that would go in the opposite direction: it would oblige merchants to accept at least one electronic payment instrument. (The proposal is unlikely to garner enough support.)
Apart from optimising the rate of change – slower or faster, depending on the country – what other policy issues are there? There is the question whether we, as a society, are comfortable with a situation where, in the words of Ms Skingsley, money is “spontaneously privatized” or whether we prefer central banks to continue to play a key role – by issuing a digital currency.
In the latter case, just how anonymous should this currency be? Electronic money is essentially software and could thus be programmed to provide any desired level of (conditional) anonymity. And what about the resilience of an all-electronic system?
In short, we are at a crossroads and have a once-in-a-lifetime opportunity to redesign our retail payment system. Complacency is not an option. As Riksbank governor Stefan Ingves put it: “When you are where we are, it would be wrong to sit back with our arms crossed, doing nothing, and then just take note of the fact that cash has disappeared”. At a minimum, authorities elsewhere should keep a close eye on Sweden and other Nordic countries.
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