Even before the pandemic, economists were discussing the end of cash as we know it. During and after the COVID-19 outbreak, many payments became electronic to minimise the spread of the infection. The pandemic fueled bank branch closures, and many businesses went completely cashless. Sweden and the United Kingdom are two examples that can give us some perspectives and teaching on this trend..

The consequences of a cashless Sweden

Sweden, one of the leading countries in technology, is now virtually completely cashless.The cashless process began in 2018 when approximately 1% of the country’s gross domestic product was circulating as cash whilst the rest of the Eurozone had 11% as cash.

In March 2023, Sweden went even further and introduced an unprecedented law that now allows traders to refuse cash and only accept electronic payments from their customers even though cash is the legal tender in the country.

A digital economy is cheaper to manage

Many businesses, especially smaller ones, prefer this electronic payment system as it seems cheaper than handling cash. Dealing with cash includes counting the money, handling any change, paying cash-in-transit companies, and insurance premiums are higher for cash traders because of the risks associated with handling large amounts of cash. 

In addition, not only is the Swedish cashless system popular with traders and businesses due to better security and convenience but consumers are also enjoying the perks. Over 60% of the population uses a payment app called Swish which was launched as early as 2012 and nowadays all the major banks in Sweden support this app.  

Multiple side-effects that cause issues

Despite all the conveniences of paying electronically, and Sweden being seen as an example of Scandinavian superiority, things may not be looking so great for Sweden and its cashless system.

A report in 2019 by a British watchdog Access to Cash used Sweden as a case study to show the “dangers of sleepwalking into a cashless society”.  The report found the extent of the freefall into a cashless system was unplanned and the system wasn’t working for a segment of the population.

There is part of Sweden’s population that opposes the loss of physical money. This sector of the public tends to be older, wealthier and live in particular locations. Leading pensioner organisations claim their members need help remembering passwords and PIN codes, and additionally, they don't trust the safety of e-transactions.

People on low incomes felt also they had less control over their finances, and people living in rural areas had no access to the infrastructure required for digital payments. 

Bank branches that shut down are another limitations that a cashless system introduces. This is causing customers to travel long distances to deposit their cash.

Financial experts are warning about potential chaos

Cash controlled by the central bank provides the framework for a country’s financial stability- it guarantees the currency’s value. Digital money is not (yet) supported by a central bank.

Rainer Böhme, a professor specialising in virtual currencies at Austria’s University of Innsbruck, explained:

"If you have money in a private intermediary [a commercial bank or app such as Swish], it’s not a direct claim to the central bank. If that intermediary turns bankrupt or turns malicious, consumers have less protection."

In addition, the Swedish population may no longer have access to state-issued money from the Riksbank,  the central bank of Sweden. State-issued currency is the most secure form of currency there is.  

Thus, according to some financial experts, a cashless, digital Swedish economy with no central bank stability may devolve into fiscal chaos, 

In 2019, the Swedish government passed an act which safeguards cash by compelling banks to ensure ATMs are easily accessible. However, some experts believe this act will not improve the situation because most retailers prefer digital payments anyway and there is no longer any obligation for them to accept cash. A recent Swedish Retail and Wholesale Council study claims that more than 50% of traders will accept no cash after 2025. 

The Riksbank has introduced a digital e-currency pilot programme as an additional form of currency to cash in an attempt to control the country’s digital economy.

Despite the rising use of contactless, cash resists the UK

The rise of contactless payments for small amounts

Contactless payments have skyrocketed over the last few years. Since 2017, payments with cash have declined by an average of 15% annually. This escalated to 35% during the peak of the pandemic.

There are many small businesses like pubs and coffee shops that accept only cashless payment options in most major cities.

However, some experts believe contactless payments in the UK are limited to lower-value transactions, typically between £25 and £30.

The role of cash with the cost of living crisis

Incidentally, there has been a recent increase in ATM cash withdrawals since the start of the cost-of-living crisis in the UK. Cash has been considered by many as a way to control a shopper’s budget and better manage their finances.

As in Sweden, the elderly are also an important demographic that is heavily reliant on the use of cash. In 2019, research in the UK showed that over 53% of people aged 75 years and older preferred using cash. Additionally, lower-income people, many of whom are also pensioners, use cash to manage their budgets.

The fight for cash to remain as a payment method

Not everyone believes that cash should be dying in the UK. Research shows that 85% of the public view using cash as a ‘basic human right’. In the UK, there is more resistance to eliminating cash, and many believe consumers should allowed the choice of how to pay.

Payment Choice Alliance is an organisation in the UK that campaigns for the continued acceptance of cash. They believe that it is definitely not dead and that there will always be a place for a cash economy. Retailers should not be allowed to impose on how consumers should pay.

This organisation is one of many in the UK who are petitioning the government to implement payment choice legislation. This legislation will ensure cash is accepted by retailers and the infrastructure exists to support this. France and Norway already have laws protecting cash payments.

A cashless economy create also a potential risk for businesses. Organisations fighting for cash transactions believe that banks and card companies could monopolize the cashless economy by increasing transaction fees, placing undue financial strain on smaller businesses. Retailers should be free to choose how to operate without placing them at the mercy of global financial corporations.

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