The race is on to see which country will become a cashless society first. In May, the government of Denmark proposed the nation should dispense of all cash payments and effectively become a cashless society, saying there is no longer a need for requirements on cash payments.
This week, the Central Bank of Ireland revealed 1c and 2c coins will no longer be manufactured, with the 28th October set as the official rounding day for retailers, suggesting the transition is being initiated very gently.
However, some Swedish academics believe that it is their country that will become the first one to go cashless. The country’s embrace of IT and widespread adoption of the mobile payment system, Swish, is helping hasten the day when Sweden replaces cash altogether, says a study from Stockholm’s KTH Royal Institute of Technology.
“Cash is still an important means of payment in many countries’ markets, but that no longer applies here in Sweden. Our use of cash is small, and it’s decreasing rapidly,” said Niklas Arvidsson, a researcher inat KTH.
Coin circulation decreasing
There has been a rapid decline in the amount of coins: there are 80 billion Swedish crowns in circulation (roughly EUR8 billion) right now compared to 106 billion just six years ago.
“And out of that amount, only somewhere between 40 and 60 percent is actually in regular circulation,” Arvidsson added. The rest is socked away in people’s homes and bank deposit boxes, or can be found circulating in the underground economy.
This is reminiscent of the current situation in the UK, where just half of UK cash in circulation is used within the domestic economy for transactions, with some being ‘hoarded’ and the rest being stored overseas for travel or stored for use in the ‘shadow economy’.
However, despite this similarity, the Bank of England pronounced UK cash to be resilient, whilst Swedish cash appears to be less so.
Innovative technologies such as Swish, the result of collaboration between major Swedish and Danish banks, are accelerating people’s migration towards digital ways of paying.
Besides simplicity and lower costs, digital payments also add transparency to the nation’s payment system. Several banks in Sweden already have 100 percent digitalized branches that will simply not accept cash.
“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,” Arvidsson said. Bank staff are required to file police reports in response to suspicious cash transactions.
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