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Why the Nordics are going cashless

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While the use of cash is on the rise in much of the world, the Nordics appear to be on a path to completely abandoning it as a form of payment. By turning to digital payments, the Nordic countries are hoping to lower costs for merchants, offer better security and make it harder for criminals to launder money. And because of their openness to new technology and trust in institutions the Nordic countries are the prime candidates to create the world’s first cashless societies.

The concept of a “cashless society” has been debated for decades and many have predicted that the Nordic countries would be among the first to realize it. In 2018, researchers from Stockholm’s Royal Institute of Technology and Copenhagen Business School even tried to set a date for it. The researchers calculated March 24, 2023 as the day when it would no longer be profitable for Swedish merchants to accept cash. They also estimated that half of Swedish merchants would no longer accept cash by 2025.

These predictions reflect a strong trend in both Sweden and the Nordics as a whole. In 2016, cash made up just one percent of the total value of all payments in Sweden and was used for less than 20 percent of transactions, down by half compared to five years earlier. In Denmark, falling demand for cash led to the Nationalbank deciding to stop printing its own money in 2015, choosing to instead outsource this task to a French supplier. The Bank of Finland has calculated that the use of banknotes in Finland will end by 2029, at the latest. In Norway, the issue of creating a cashless society by 2030 has even been brought up as a political goal by the conservative party.

Trust and openness are big factors

In this respect, the Nordic countries are clearly outliers and in most countries the use of cash is actually on the rise. Two potential reasons for this might be that the Nordic populations have a high trust in institutions, like banks, and an openness to new digital technologies. Card payments are one example of this. Statistics from Visa show that the Nordic countries are the “world leaders” when it comes to card payments, using them even for small amounts where most countries prefer cash. Because of that, card payments are by far the most popular payment method in the region.

Another example of Nordic openness to new forms of payments is the growth of mobile payment apps. Together, Swish, Vipps and Mobile Pay have gathered more than 13 million users across Sweden, Norway, Denmark and Finland. They now serve about half of the region’s population. These apps were developed by banks as an alternative to cash for peer-to-peer payments but can now be used for both in-store and online purchases. The Swedish national bank, the Riskbank, is also investigating yet another way to replace cash with a digital alternative. The idea is to create a new digital currency, called the e-krona, that would give the public access to a completely digital alternative to cash that is backed by the Swedish government.

Saving money and fighting crime

But trust in new technology and banks aren’t the only reasons why the Nordic countries are moving away from cash. One of the biggest benefits of “going digital” is the money you save. In that 2018 report about Sweden going cashless, the researchers pointed out the cost of handling cash as a main driving force behind merchants wanting to abandon cash. They estimated that the average Swedish retailer spent 113 minutes a day handling cash and that the costs associated with this handling equaled 4.1 percent of the purchase amount. This can be compared to card transactions which had an average cost of 0.4 percent of the transaction amount. The researchers also concluded that the remaining cash transactions would become even more expensive as the use of cash decreased. Because of this and the reduced risks of robberies, both merchants and banks see big benefits in moving from cash to digital alternatives.

Another reason for going cashless has to do with making life more difficult for criminals. Cash is the preferred form of payment for criminals since it’s both nearly untraceable and universally accepted. Without access to cash, criminal enterprises would therefore find it a lot harder to conceal illegal transactions and launder money from illegal activities.

An interesting example of this dilemma can be found in India. Back in 2016, the Indian government tried to combat corruption and other crimes by withdrawing the 500 and 1 000 rupee notes from circulation. These two denominations, which together made up about 86 percent of the total value of all the money in circulation in India, were made effectively invalid overnight and people were given 50 days to turn their notes into banks to exchange them for new ones. The idea behind the withdrawal was to funnel “black money” into the open, where it could be taxed, and to expose those who had gathered large amounts of cash through illegal activities. While this “demonetization” led to much turmoil and ultimately proved unsuccessful, it does illustrate the vital role that cash plays in crime.

What’s stopping us?

While there are clear advantages to going cashless the idea has also met resistance. Many have argued that removing cash would cause problems for certain groups, especially the elderly, who are less likely to have access to the digital alternatives to cash. Another concern is that relying completely on digital payments might make the economy vulnerable. In the case of a crisis, where electricity and internet connections are down, cash still plays a vital role as it requires neither.

With these challenges still unsolved, none of the Nordic countries seem ready go completely cashless just yet. What is clear, though, is that the increased speed and accessibility of card payments, app payments and other payment technologies means that most Nordic consumers no longer need cash in their day-to-day life. By that definition the Nordic countries are, in a very real way, already cashless societies.

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