A homeless man is selling a newspaper in the bustle of a major city. A passerby stops to buy a copy. This scene could play out in New York or London or Berlin. But this wintry scene on the streets of Sweden’s capital Stockholm plays out differently: The homeless man pulls out a smartphone and card reader, and the customer can choose whether he wants to buy a copy of Situation Sthlm via credit card or mobile payment app.
To Swedes, this has long become part of their reality. They are advancing with great strides into a world of digital money. Throughout the country “no cash accepted” signs are a common sight, whether you're getting a cup of coffee or a beer, buying a bus ticket, visiting the museum, using a public restroom or even making a church donation. In Sweden, hard currency is no longer needed in everyday life; it's a nearly cashless society.
In Sweden, the amount of circulating cash has dropped to 57 billion krona, equivalent to €5.6 billion or $6.9 billion. The percentage of transactions carried out in cash has slipped below the 20 percent mark. “In the not-too-distant future, Sweden may become a society in which cash is no longer generally accepted,” according to the Riksbank, Sweden’s central bank.
This stands in stark contrast to Germany. Bundesbank board member Carl-Ludwig Thiele said recently, “Germans love cash.” He is not wrong. More than €250 billion, one-fifth of the euro zone's cash supply, is circulating in Germany. According to a new study by the Bundesbank, around three-quarters of all consumer transactions in Germany are still made in cash. Germans carry an average of 107 euros in their wallets — the most in Europe.
Germans are slowly warming to the idea of switching to plastic and digital payments. But only a quarter of Germans consider cashless payments safe, according to a study by Barkow Consulting. In addition, many Germans believe that cash gives them better control over their finances.
In comparison, the Swedes' confidence in their politicians and banks is remarkably high – a key requirement for a cashless society. Every year, 3.5 billion transactions are made with plastic in Sweden. Sweden's most popular mobile payment app, Swish, facilitates another 1.5 billion transactions. More than 60 percent of the population, about 6.2 million Swedes, use the app, which connects their mobile number to their bank account.
Sweden is about to come full circle. In 1661, it was the first country in Europe to introduce banknotes as official currency. Now more than 350 years later, it will be one of the first countries in the world to eliminate it.
We are a technology-driven society that believes in the benefits of digitization. Leif Trogen, Swedish Bankers' Association
The country has been a pioneer in the digital economy. In the early 1990s, many Swedes already had credit cards, whereas only 36 percent of Germans had credit cards in 2017 — and in 2008 it was only 27 percent. In the mid-2000s, banks began to close branches. At the end of 2009, Sweden became one of the first countries in the world to introduce the LTE mobile network, as many ATMs were being taken out of service. Nowadays, bank customers can no longer deposit or withdraw money in many branches across Sweden. There are 20 SEB bank branches in Stockholm, with only two holding cash.
“We are a technology-driven society that believes in the benefits of digitization,” said Leif Trogen of the Swedish Bankers’ Association. It is not surprising that he embraces the disappearance of cash. Financial institutions benefit from this development, as they save cash management costs while earning well on fees customers pay to use digital services.
They also gain valuable insight into their customers’ consumption behavior, something many Germans find distasteful. Privacy matters a great deal in the country where many lived under surveillance of the Stasi in East Germany. In order to facilitate the march into the cashless society, the Riksbank, Sweden’s central bank, is considering a revolutionary step: creating its own cryptocurrency, the e-krona.
But not everyone is on board with the rapid changes. If data infrastructures go down in a crisis, how could people make transactions without cash? Are monetary systems that rely on third-party processing (and fees) truly universal and accessible to all? The former president of Interpol, Björn Eriksson, sees a cashless society as a dangerous one. He warned that hackers could invade the country’s digitized monetary system and “destabilize all of Sweden.” Such fears are not irrational: Credit fraud and identity theft are already flourishing in Sweden today. The research institute Euromonitor International has found that across the EU fraud cases in the digital world are rising nowhere as rapidly as they are in Sweden.
Roman Tyborski writes for Wirtschaftswoche, Handelsblatt's sister publication. Stephanie Ott adapted this article for Handelsblatt Global in New York. Grace Dobush contributed reporting from Berlin. To contact the authors: [email protected] and [email protected].