Could Sweden be the canary of cashlessness?

  • Swedish government committee report proposes commercial banks maintain ‘reasonable access’ to cash

  • Central bank continues to express cashless concerns

  • Could Sweden’s experience inform less-cash policy decisions in Australia?


Source: Committee of Inquiry on the Riksbank


Point of View


The Swedish Ministry of Finance Committee of Inquiry on the Riksbank released its Interim Report for consultation, on 11 June 2018 (English summary, pp 21-30), in response to the waning use of cash in Sweden. Cash makes up just 13 per cent of consumer payments, down from 40 per cent in 2010, according to the Riksbank’s May 2018 consumer payments study.


The Committee proposed that commercial banks maintain ‘reasonable access’ to cash, meaning that 99 per cent of Swedes should have to travel no more than 25 km to a cash access point. The report is a formal move that ostensibly supports the position of Sweden’s central bank. The Sveriges Riksbank, nevertheless, suggests that rather than an inadequate supply of cash by banks, decline in cash use is primarily driven by consumer preferences. Reasons cited for changing behaviour include the strong uptake of Swish for person-to-person payments and iZettle, which offers low-cost card acceptance devices to micromerchants, plus growth in e-commerce and changing demographics.


The Governor of the Riksbank, Stefan Ingves, has been strident in publicising concerns regarding the rapid decline in the use of cash in the Scandinavian nation. In particular, voicing that the retail payment market could become controlled by the private sector in the absence of cash resulting in less-than ideal outcomes for society. Ingves has also been discussing a possible safeguard, the so-called ‘e-krona’, which would give people access to an alternative form of central bank money. The Riksbank is investigating the prospect of issuing an e-krona.


In a speech on 4 June 2018, Ingves noted that if the steep decline in cash “…continues without the Riksbank taking action, we risk [the payment market becoming] completely dominated by private players with no public alternative.” If handled incorrectly, this “…could lead to monopoly situations… and socio-economic inefficiency.” Moreover, in February he wrote that “There are those who think we have nothing to fear in a world where public means of payment have been replaced completely by private alternatives. They are wrong, in my opinion.” Ingves also touched on the issues in an IMF journal article, published in March 2018.


Echoing the Governor’s sentiments, the Committee stated in its report that “Cash and an effective cash infrastructure must not be allowed to disappear before a position can be taken on [a number of] issues.”


More broadly, a number of arguments for and against a cashless society have been floated. On the one hand, costs of cash management (i.e. making, moving around and protecting money) would disappear. Furthermore, a cashless economy would lead to less tax evasion, and a reduction in crime related to theft and the black economy.


To this point, on 25 May, the Australian Government announced it would introduce a $10,000 limit on cash payments made to businesses for goods and services, effective 1 July 2019, with a view to “cracking down on black economy participants”. However, one of the alternative acceptable ways to pay stipulated by government would be by cheque, which is a bit odd given efforts to reduce their use in Australia.


On the other hand, some people in society, often those who are disadvantaged, rely heavily on cash; for example, the elderly, homeless people, the unbanked, people with disabilities, travellers and children. More widely, people would no longer have access to a private and anonymous way to pay. Furthermore, people tend to overspend with the ease of electronic payments, whereas using cash is ‘painful’, and cash can be a useful budgeting tool.


Electronic payments are vulnerable to power outages and technology failure. Just this year, the ATO, DHS, Telstra, NAB, CBA, ANZ and Westpac NZ suffered technical glitches. Further afield, Visa’s European network failed and MasterCard’s server went down in the US. Last year, the Service NSW payment platform went down and WorldPay had a global outage. “Even something as simple as a dead phone battery could leave you ‘penniless’.” 




Use of cash in Australia is also declining, as evidenced by the Reserve Bank’s series of consumer payments surveys. In 2016, Australians used cash for 37 per cent of their payments, compared with 47 per cent in 2013. This is also reflected in the reduction in the number and value of ATM withdrawals since around the time the ATM reforms were introduced in March 2009.


While the evidence points to a less-cash Australian society in future, we currently use cash rather more often than Swedish people do. Moreover, the value of cash in circulation has grown, at around 6 per cent each year, over the past decade, whereas it has been declining in Sweden over the same period. The situation in most other countries is the same, including the UK, US, Canada, Euro area and New Zealand.


But the number of ATMs deployed in Australia has also begun to taper recently. Since September last year, the number of ATMs has decreased, by around 600 to March 2018.


The UK is also experiencing similar patterns: branches are closing and ATMs are disappearing. This has accelerated since LINK, the UK ATM network, announced on 1 November 2017, that the interchange fee would drop from 25 to 20 pence incrementally over four years, beginning 1 July 2018. To put this in context, UK ATM operators (both financial institutions and independent deployers) can opt in to LINK’s ‘free-to-use’ network, whereby they receive the interchange fee set by LINK from card issuers. Alternatively, they can charge cardholders a directly (in early 2017, the average direct fee was £1.70), foregoing the interchange fee.


In contrast to Sweden, the Payment Systems Regulator has acted pre-emptively to protect Britons’ access to cash. On 13 February, it published requirements of LINK to “ensure there continues to be a broad geographical spread of free-to-use ATMs.”


While statistics on cash withdrawals and the number of ATMs are published regularly, to get a complete picture of how Australians use cash, we shall have to wait for the next Reserve Bank consumer payments survey. Almost certainly, Australian consumers will make a smaller share of transactions with cash than in 2016, but by how much is uncertain.



The opinions and views expressed in this publication are those of the authors exclusively and do not purport to reflect the opinions, views or official policy position of AusPayNet or its members. This publication is also subject to the AusPayNet Terms of Use and Privacy Policy available on the AusPayNet website.




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The opinions and views expressed in this publication are those of the authors exclusively and do not purport to reflect the opinions, views or official policy position of AusPayNet or its members. This publication is also subject to the AusPayNet Terms of Use and Privacy Policy available on the AusPayNet website.


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