At a time when the dominant narrative around cash is that its demise is all but inevitable, as well as broadly desirable, the 2024 payment report by Sweden’s Riksbank may offer a cautionary tale.
In October last year, in More Good News for Cash in Europe, More Bad News for Digital Dollar in US, we reported that recent developments suggest that the trend away from cash and toward purely digital-only payment systems may not be quite as smooth or as seamless as some may have wished or expected. One of the developments we highlighted in that report was growing concern among central bankers and politicians in Sweden, one of Europe’s most cashless economies, about the unintended consequences of driving cash out of the economy:
Even by late 2020, Sweden had less cash in circulation than just about anywhere else in the world, at around 1% of gross domestic product, according to the latest available data. That compares with 8% in the U.S. and more than 10% in the euro area. As a recent piece in Interesting Engineering notes, Sweden is already “officially cashless”:
Cash is never needed, not even for small purchases like hot chocolate at a Christmas market in Stockholm. All vendors have a mobile payment chip-and-PIN card reader like the one offered by Stockholm-based mobile payments company iZettle, or they accept payments through the mobile application Swish. Swishing is perhaps the easiest way of payment for everyone.
The Risks of Going Fully Cashless
But now the country is beginning to realise that an almost exclusively digital payments system comes with significant risks, especially at a time of heightened geopolitical tensions. In time-honoured fashion, the article in the UK Telegraph began with a spot of fearmongering about Vladimir Putin.
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