Swedish central bank wants cash to be a legal right

Stockholm

The push toward cashless transactions is coming from many directions, but is the transition away from coins and notes happening too fast? Sweden’s central bank thinks so. In a statement submitted to the Swedish ministry of finance last week, Sveriges Riksbank – the central bank of Sweden – warns the move is happening “too rapidly” and parts of society are at risk of getting left behind.

It’s now calling on parliament to introduce a legal requirement that guarantees banks’ cash handling services remain in existence. While the central bank broadly welcomes the move toward digital, the central bank warns that remote parts of the country and certain demographics could get locked out of the financial system altogether at the current pace of change.

The benefits of going cashless are numerous, including the improved security of not carrying physical money, less friction in payments and lower handling costs, but the comments from Sveriges Riksbank chime with growing concern about the less positive side effects going cashless could have. Apart from potentially deepening financial exclusion by locking people out of the financial system, another fear is around privacy.

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Sweden is frequently touted as an example of what cashless society could look like, home to high profile European fintech companies such as e-commerce checkout provider Klarna and mobile payments firm iZettle. Meanwhile the circulation of cash continues to fall as Swedes’ reliance on coins and notes declines. The country’s banks have played a role in driving this shift. In 2012 a group of Sweden’s biggest banks – including Nordea, Handelsbanken and Danskebank – launched digital payments app Swish, helping galvanise the transition away from cash which is increasingly poplular among its (broadly) tech savvy population.

However, Sveriges Riksbank argues that while these are positive steps for the country, banks need to remember that there are still parts of Sweden and situations where cash is the only option.

“This development is positive in itself, but needs to take place at a rate that does not create problems for certain groups or exclude anyone from the payment market,” the central bank comments, warning that cash could disappear faster than the adoption of alternative payment options gains traction.

“If the banks continue to set the pace, there is a high risk that the possibility of using cash will disappear before alternative means of payment have become widespread and generally accepted,” states Sveriges Riksbank. “To restrain this development, the Riksdag (the Swedish parliament) should introduce a clear obligation for the banks to provide basic functions that meet customers’ needs.”

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