Sweden’s march towards a cashless economy went into reverse

Endangered specie.
Endangered specie.
Image: Reuters/Fredrik Sandberg
We may earn a commission from links on this page.

Sweden is at the vanguard of countries embracing digital payments, so much so that the Scandinavian country could go effectively cashless in less than four years. In 2018, however, the amount of banknotes and coins in circulation increased for the first time in more than a decade.

Swedish banknotes and coins in circulation rose 7% last year, to 62.2 billion krona ($6.5 billion), according to the European Central Bank. It was the first yearly increase since 2007; the value of cash in circulation has dropped by around 45% over that period.

Are Swedes falling back in love with cash? Probably not. Groups that represent seniors and other vulnerable people have pushed back against the country’s rapid shift to digital payments, but last year’s uptick in cash circulation is due, in part, to technical factors. Namely, there was a currency overhaul in which old banknotes and coins could be exchanged for new ones (pdf).

Some Swedes may also have boosted their personal holdings of banknotes and coins in case of a crisis. The Swedish Civil Contingencies Agency recently recommended that Swedes put aside some cash in case of an emergency, such as a data center glitch that causes payments systems to go offline, or terrorism or a cyber attack.

These factors are probably one-off instances, as Swedes continue to switch to card payments and mobile payment apps like Swish. This puts government officials in a tough position, as not everyone is ready for digital transactions. Poorer people and the elderly tend to rely on cash. As more and more payments take place through smartphones (even going to the toilet in Sweden can require an app), it can be difficult for people who aren’t digitally savvy to keep up. Others want to preserve their privacy, or simply want to keep their payment options open.

Some complain that banks and shops, rather than consumers, are unnecessarily accelerating the shift. Critics note that Sweden’s banks are abandoning paper notes and coins by refusing to accept and process them, and that stores are widely refusing to accept cash payments. The central bank has suggested (pdf) that banks be required to provide ways to accept cash, and the legal obligation for merchants to accept physical money should be clarified. Sweden’s Council on Legislation may review these measures later this year.

Even if there are legal changes to requirements for cash handling, the amount of cash in circulation, and in usage for payments, is widely expected to continue its downward spiral. Indeed, some worry that new requirements could backfire, should financial institutions start charging fees to deal with paper currency and metal coins. In all likelihood, Sweden will continue to serve as a laboratory for what happens when a society gives up on cash.