Sweden Heads Toward a Cash-Free Economy

Sweden Heads Toward a Cash-Free Economy

Timothy Taylor 04/06/2018 7

Sweden seems headed toward a cash-free economy. Here are some comments from Stefan Ingves, Governor of Sveriges Riksbank, the central bank of Sweden, in a short essay called "Going Cashless:

The governor of the world’s oldest central bank discusses his country’s shift toward digital money" (Finance & Development, March 2018, 55:2, pp. 11-12):

"Sweden is rapidly moving away from cash. Demand for cash has dropped by more than 50 percent over the past decade as a growing number of people rely on debit cards or a mobile phone application, Swish, which enables real-time payments between individuals. More than half of all bank branches no longer handle cash. Seven out of ten consumers say they can manage without cash, while half of all merchants expect to stop accepting cash by 2025 (Arvidsson, Hedman, and Segendorf 2018). And cash now accounts for just 13 percent of payments in stores, according to a study of payment habits in Sweden (Riksbank 2018). ...

I am convinced that within 10 years we will almost exclusively be paying digitally, both in Sweden and in many parts of the world. Even today, young people, at least in Sweden, use practically no cash at all. This demographic dimension is also why I believe that cash’s decline can be neither stopped nor reversed. While the Nordic countries are at the forefront, we are not alone. It is interesting to see how quickly the Chinese payments market, for instance, is changing.

Ingves mentions some issues that are likely to arise with this transition. One is that "it will likely further limit financial access for groups in society that currently lack any means of payment other than cash." Other issues are the extent to which the new payments infrastructure, which may shift in substantial part from central banks to private firms, will be safe, secure, rapid, and low-cost.

I would also add that the prospects of a cash-free society offers an interesting angle on proposals to eliminate large-denomination bills (for example, see "Eliminate High-Denomination Bills" (March 18, 2016). The usual justification for such a step is that it will make life much harder for criminals and drug dealers, and also that it could help a central bank to run a more expansionary monetary policy if interest rates have already been pushed down to near-zero(as happened in the US after the Great Recession). If most people find that they are no longer using cash at all, the practical difficulties of eliminating high denomination bills are likely to look more surmountable. 

A version of this article first appeared on Conversable Economist.

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  • George Lourensz

    Don't forget every time you use your card, you are asking your bank permission to spend. Go cashless, and your bank or government will have the power to make you homeless or to let you starve.

  • Nick Johnson

    What would happen if there was ever a blackout for a week ???

  • Willam Paterson

    Say goodbye to lotteries, yard sales, private sales, under the table jobs, tips for service/donations, etc.

  • Alex Miller

    I'm not looking forward to giving permission to a bank so they can tell me how, when, and where i can spend my money.

  • Darren Brace

    Well, this will be good for the price of bitcoin at least.

  • Loic Maisey

    This is a way for the Swedish government to control its population.

  • Haylie Carney

    Our world is heading to a cashless society. It's an inevitable move.

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Timothy Taylor

Global Economy Expert

Timothy Taylor is an American economist. He is managing editor of the Journal of Economic Perspectives, a quarterly academic journal produced at Macalester College and published by the American Economic Association. Taylor received his Bachelor of Arts degree from Haverford College and a master's degree in economics from Stanford University. At Stanford, he was winner of the award for excellent teaching in a large class (more than 30 students) given by the Associated Students of Stanford University. At Minnesota, he was named a Distinguished Lecturer by the Department of Economics and voted Teacher of the Year by the master's degree students at the Hubert H. Humphrey Institute of Public Affairs. Taylor has been a guest speaker for groups of teachers of high school economics, visiting diplomats from eastern Europe, talk-radio shows, and community groups. From 1989 to 1997, Professor Taylor wrote an economics opinion column for the San Jose Mercury-News. He has published multiple lectures on economics through The Teaching Company. With Rudolph Penner and Isabel Sawhill, he is co-author of Updating America's Social Contract (2000), whose first chapter provided an early radical centrist perspective, "An Agenda for the Radical Middle". Taylor is also the author of The Instant Economist: Everything You Need to Know About How the Economy Works, published by the Penguin Group in 2012. The fourth edition of Taylor's Principles of Economics textbook was published by Textbook Media in 2017.


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