Swedish retail payment market is rapidly moving away from using cash

Swedish retail payment market is rapidly moving away from using cash

Swedish retail payment market is rapidly moving away from using cash


The Swedish retail payment market is rapidly moving away from using cash. The outstanding value of cash in circulation has dropped to 1% of Swedish GDP. This development raises some crucial issues regarding the state’s role in the payment market.

For hundreds of years, the public has been offered central bank notes and coins. If cash stopped working, it would leave all individuals to rely on the private sector for access to money and payment methods. It would be a historical change without precedence. The central bank of Sweden, the Riksbank, is therefore investigating the potential consequences of this change, including how to design a central bank digital currency, called the e-krona. But what is the e-krona exactly?

Let’s begin at the beginning. Swedish legislation makes it possible for retailers, restaurants and other companies to refuse to accept cash, for instance by putting up a sign at the entrance or by the till. Together with banks that stop offering cash services, refusal of cash is an increasingly widespread phenomenon. Furthermore, Swedes on average are happy to adapt to new technologies, so cards are widespread and the instant payment app Swish has been downloaded by more than half of the population.

By connecting a bank account in any bank with a mobile phone number, Swish has become a popular way to share a restaurant bill, distribute pocket money to children, collect money for a birthday gift at the office and to pay for goods at street markets. Settlement takes place with the help of the Riksbank’s real time gross settlement system. To “swish” money has even become a verb in the Swedish language.

Within a few years, if the current trend in cash usage continues, Swedes could therefore find themselves in a situation where cash is no longer generally accepted as a means of payment.

The development raises some crucial issues regarding the state’s role in the payment market. For hundreds of years, the public has been offered central bank notes and coins. If cash stops working, it would leave all individuals to rely on the private sector alone to get access to money and payment methods. This would be a historical change without precedence. Norway is seeing a similar trend, and the two central banks are cooperating in this area. In the Eurozone, cash is still used to a high degree. The value of the outstanding amount of cash is equivalent to 10% of the Eurozone GDP, versus the Swedish equivalent of only 1%.

Swedish retail payment market is rapidly moving away from using cash
 The value of Swedish cash in circulation over the last 25 years. Image: Bloomberg.

source:weforum.org

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