Business Essentials for Professionals

Is a cash-free future really in your best interest?


Scandinavia is set to be the first “cashless society”, and according to its Governments and financial institutions, it could transition much faster than expected. However, people in Scandinavia are increasingly motivated to hide stacks of cash at home, fearing particularly less access to cash and negative interest rates.

Sweden is shaping up as the first country to plunge its citizen into a fascinating, yet terrifying, economic experiment: negative interest rates in a cashless society. Denmark and Norway might soon follow, even before we see the actual impact this will have on Sweden.
Already in Sweden, banks may call the police on you if you’re using too much cash, because their first thought is terrorism or criminal activity. Banks have started removing ATMs from rural areas, negatively impacting farmers and the elderly. Swedish banks are clearly pushing for a cashless society, despite how it’s being negatively received by consumers, which raises many questions. In Scandinavia, Credit Suisse even says the rule of thumb is “If you have to pay in cash, something is wrong.”

But the problem is simple; if banks charge customers negative interest in a cashless society, customers only have two choices; either spend their cash, or let the banks take it. Of course, this ‘experiment’ is supposed to encourage customers to spend more of their money, rather than save it, to spur economic growth. However, it is likely that most of this money will just sit in the banks, benefiting them much more than their customers.

The Swedes therefore won’t have any way to “hide” and protect their money in a cashless society, and negative interest rates always benefit the banks at the end of the day, as most of the banks usually raise their charges and fees to accept these rates.
And banks aren’t the only players to push for a cash-free Scandinavia. Since there are major gains at stake, online giant companies like Facebook, Google or Apple, are seizing a business opportunity. Recently, all of them have started to offer online payment solutions and they now see cash-free countries as a privileged market. All the actors around credit cards manufacturing, security chip makers, and many companies also wish to see cash disappear… for more profits.

A resistance to this ‘alternative’ society is growing, and people are increasingly protesting the idea. Björn Eriksson, former head of Sweden’s national police and now head of Säkerhetsbranschen, a lobbying group for the security industry, has become a spokesperson speaking on behalf of all Swedes frustrated with the idea of a cashless country. “I’ve heard of people keeping cash in their microwaves because banks won’t accept it,” he told The Local (1).
Eriksson and the people he represents are afraid that the promises the Government has made for a cash-free future is just a scheme that will benefit the banks and not their customers. Yet, the Governments from the three Scandinavian countries have not sought to consider the negative impact of a cashless society (2). If anything, the more efficient tax collection and access to ‘big data’ entices them to continue to support the idea. The lack of privacy that this causes for all citizens is concerning.

Even the bankers associations recognize the issues here. Leif Trogen, an official at the Swedish Banker’s Association, acknowledged that banks were earning substantial fee income from the cashless revolution. It costs money for banks to conduct commerce, so “reducing its use makes financial sense,” according to Trogen (3)… But it may not make financial sense for the banks’ clients, or even to citizens who don’t necessarily have money in the banks.

Fearing that the cashless revolution would become a major political topic, the Swedish central bank, the Risksbank, has said that it predicts that cash will still be circulating in the country for the next 20 years or so and that cash “was certainly not dead.” Recently, the Riskbank even issued newly redesigned coins and notes.

In Sweden and in other Scandinavian countries, the topic has already become a really sensitive political subject. With the Governments supporting the banks to push for a cashless future, increasingly groups are making their voices heard to challenge the plan. We should soon see if the Scandinavian ‘experiment’ takes a step back after listening to what their people really want, or whether they will continue to push for the transition to a cashless economy, regardless of the potentially negative implications.

(1) Swedish online newspaper
(2) Bernie Sanders, Democracy in Denmark and the cashless society, Newshub, March 16th 2016
(3) In Sweden, a Cash-Free Future Nears, Liz Alderman, The New York Times, December 26th 2015

In the same section
< >

Tuesday, February 6th 2018 - 15:02 The cashless society, an epic betrayal of democracy