The vanishing Krona: How Sweden is embracing a cash-free world

A payment app called Swish could ensure the currency note is completely dead in the country by 2025, and with it, many hope, a lot of crime too.

Jamie Mullick

If you asked a Swede when she last paid for something in cash, chances are she may not exactly remember. Over the last few years, Sweden has seen a massive shift away from cash — instead embracing online payment apps and cards. It is now generally accepted that Sweden could become the world’s first cashless society.

The Change

Late last year, Stockholm’s KTH Royal Institute of Technology published a paper on Sweden’s shift away from cash, which estimated the circulation of the Swedish Krona to have fallen from over 106 billion (around 11 billion Euro) six years ago to 80 billion (8.4 billion Euro) currently. “And out of that amount, only somewhere between 40 and 60 percent is actually in regular circulation,” industrial economics researcher Niklas Arvidsson, lead author of the study, was quoted as saying. The rest, Arvidsson said, was in safe deposit boxes, stashed inside homes, or being used in criminal activity.

According to business intelligence company Euromonitor, in 2015, some 42% of consumer transactions globally were in cash — in Sweden, on the other hand, only 11% of consumer transactions last year were in cash.

Royal Institute of Technology researchers predict Sweden might go completely cashless by as early as 2025. Between 2010 and 2012, more than 500 bank branches across the country went cashless and over 900 cash vending machines were taken off, according to data published by Credit Suisse.

The Reasons

Arvidsson has credited the widespread shift away from cash to the sudden success of a mobile payment system called Swish. Swish, a collaboration of major banks in Sweden and Denmark, is a payment app that is used for real-time money exchange between people. Swish has the potential to change the entire financial infrastructure of the country, Arvidsson’s research says. Swish has more than 3.5 million registered users, nearly 40% of Sweden’s 9.5 million population.

Swedish banks have been early adopters of advanced IT systems like digital giro and instant electronic payment systems, along with apps like Swish and iZettle which have made it easier for small business owners — otherwise the biggest hurdle in the shift from cash — to be able to operate cash-free.

For banks, minimising use of cash holds obvious attractions — coins and paper currency are expensive to store and transport. While every succeeding generation everywhere has been using less cash, in general, Scandinavians have been ahead of the rest of the world in moving towards cashlessness. Indian efforts at pushing plastic have run into opposition — the reason being India’s extraordinarily large stash of cash, and the entrenched vested interests.

The Impact

In Stockholm, even homeless street vendors can be seen using cards instead of cash. Swedish debit cards, like in India, require PINs for every transaction, so they offer a reasonable degree of security. Swish and iZettle allow people to settle daily bills like cabs and restaurants, and even for items like newspapers or magazines. Local churches accept donations through card machines. According to the Swedish government, while some vendors have been frustrated by the cost of installing digital payment machines and the small surcharge it attracts, most have seen it as a necessary move towards cashlessness.

Fall in Crime

Digital payments are transparent, making it easier for law enforcers to track illegal transactions. “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 in his research. Tax evasion too has become a lot easier to check, he said.

Bank robberies have fallen drastically — from 110 in 2008 to just 7 in 2015 — according to the Swedish Bankers’ Association; a 30-year low. The Swedish financial sector has become more cost efficient as a result.

Even small-time crime has fallen drastically because very few people have cash on them. Abba singer Björn Ulvaeus has been one of the most famous cash-free campaigners in the country ever since his son was robbed a few years ago. Cash, he says, is the primary cause of crime in the world, and that “all activity in the black economy requires cash”. The Abba museum in Stockholm operates completely cash-free.

The Downside

Not all is good with this rapid shift in payment systems, however. One of the biggest problems Sweden is facing is the exclusion of segments of the population who are slow to embrace new technologies — or people who don’t own or don’t know how to handle smartphones and the Internet, especially the elderly, homeless, or the unregistered migrant.

Another problem that may arise is of electronic fraud, Stockholm-based private security expert Björn Ericsson told The Guardian. “With figures from the Swedish National Council for Crime Prevention showing that fraud has more than doubled in the last decade.”

Again, complete cashlessness may produce a peculiar human problem. The Swedish people, according to Arvidsson, are sentimental about coins and notes. “A recent survey I worked on showed that two-thirds of Swedes think carrying cash is a human right,” Arvidsson was quoted as saying. “So people like to know their cash is there, even if they don’t necessarily use it.”