Swedish Phaseout Is Death of Cash On the Cards?

As Germany stubbornly clings to cash payments, Sweden is leading the charge among many other European nations towards a cashless society. Lower costs, less crime and better hygiene are just some of the benefits.
No card, no cake. A cafe in Stockholm Cafe.

When the chief executive of Deutsche Bank, John Cryan, predicted a cashless future within ten years at the World Economic Forum in Davos last week, the news gave rise to vociferous debate in Germany.

In Sweden, on the other hand, people felt vindicated: “We prefer credit cards” is written in large letters on signs in many Swedish supermarkets. The Stockholm Public Transportation Company no longer accepts cash payments, and even newspapers or a few bread rolls can be paid for with debit or credit cards or by mobile phone. And parking meters were switched to a cashless payment system a few years ago.

A future without cash, a scenario feared by many Germans, is almost a reality in Sweden. Former ABBA band member Björn Ulvaeus is a fan: A few years ago he lived for an entire year without using cash. His experiment made headlines internationally but merely caused shoulders to be shrugged in his home country, where most Swedes have ceased carrying cash with them.

Mr. Ulvaeus is calling for coins and bills to be done away with. They are “non-hygienic and promote labor on the black market.” He is trying to lead the way: The ABBA Museum in Stockholm does not accept cash.

We stopped cash transactions because we registered a change in customer behavior. Anna Sundblad, Former Swedbank spokeswoman

“Today in retailing, a good 80 percent of all payments are made via cards,” says Bengt Nilervall from the Swedish Chamber of Commerce. A new study by the Royal Institute of Technology (KTH), a Swedish university, backs this up. “We now use only very little cash, and payment with cash is rapidly declining,” it says. According to KTH calculations, six years ago 109 billion krona (€11.7 billion/$12.7 billion) of cash was in circulation; today the figure is 78 billion krona.

More than five years ago, the country’s big banks adjusted to a life without cash. At 80 percent of their branch offices, SEB, Nordea and Swedbank allow neither cash deposits nor cash withdrawals. “We stopped cash transactions because we registered a change in customer behavior,” says former Swedbank spokeswoman Anna Sundblad. Only commercial banks still accept cash, and then only at a few offices. It is unclear how long this will continue.

The intention is to continue to closely monitor developments. One factor in making a decision could be the rising number of hold-ups at branch offices of commercial banks. Ever since competitors more or less abandoned cash transactions, they have seen a drastic decline in robberies.

Commercial banks are also aiming at a cashless future: Together with the other three banks, Swedbank is participating in the mobile payment system Swish, which can handle purchases and sales. Meanwhile at many supermarkets, there are terminals for both cards and Swish payments. The iZettle system, developed in Sweden, offers the option of making private purchases and sales: It uses mobile phones to enable payments via debit or credit cards.

The Swedish Central Bank has calculated that cash transactions cost society billions of krona every year. Money has to be counted in the evening and transported to banks. All this causes expenses that disappear in cashless transactions. According to calculations by the KTH, cash payments entail costs amounting to around 0.26 percent of the gross domestic product. With cards, the costs are 0.09 percent.

The relatively rapid transition to a cashless society, however, has also attracted criticism. Björn Ericsson, a former head of the state police, has become a defender of coins and bills. He is supported by pensioners' associations complaining that elderly people have problems with mobile phones, apps and Internet banking.

But the new technology appears to have the upper hand. In October, the Swedish Central Bank issued fancy new bank notes with portraits of Swedish icons Astrid Lindgren and Ingmar Bergman, among others. Further bills with the image of actress Greta Garbo are scheduled to follow this year. But the bank said that interest in the new, secure bills is significantly less than in earlier issuances.

It seems that cash is no longer king in the far North.


Helmut Steuer is Handelsblatt's correspondent for northern Europe. To contact the author: [email protected]