Sweden is on its way to becoming first cashless economy of the world with a noticeable decrease in the use of cash within its geographical boundaries. Sweden has a strong hold on information technology (IT) which has led to abundant use of electronic transactions (ETs). Even small money transactions are done electronically. ETs are so in trend that paper money transactions in the country reportedly tend to create suspicion in the minds of the people.
Mr. Niklas Arvidsson, a professor and researcher in industrial economics and management department at KTH Royal Institute of Technology in his study found that Sweden might become the “world’s first cash free nation”. Arvidsson opined that the reason behind decrease in the Swedish bank notes is the country’s strong hold on new technologies, advancements in mobile payments and the government’s control over corruption, which makes its citizens feel safe about electronic money.
Arvidsson also stated that the circulation figures of paper money from the Riksbank, Sweden’s central bank, support his statement. There are less than 80 billion Swedish bank notes in the circulation, a significant decrease from just six years ago, when 106 billion Swedish bank notes were in circulation. Even out of the money currently in circulation, only 40 to 60 percent is in actual regular circulation, while the rest is absorbed in homes, bank deposit boxes or can be found circulating in the underground economy.
With a robust IT sector, financial services in Sweden have become increasingly competitive. Further, the Swedish consumers are always open for electronic payment services, leading to the success of this mode. Swish, a direct payment app used for transactions between individuals in real time is the outcome of collaboration between major Swedish and Danish banks. Arvidsson added with digital giro systems, early electronic payment services and other advances in online financial services, Swedish banks have been early adopters of advanced IT systems and the app has already transformed the banking system. He said if Swish is to be used on a larger scale, including retail transactions and e-commerce, the whole payment system needs to be refurbished.
Electronic payments are simple as well as involve lower costs; they also show a sense of high transparency in the nation’s payment system. Many of the bank branches have already become 100 percent digitalized branches and do not accept any cash. Bank branches that still accept bank notes and coins require the customer to explain the source of cash as per the regulations aimed at prevention of money launder and terrorist financing.
Going forward, despite the benefits of the new system such as the simplicity and popularity of the new payment system, it will be a challenge for the Swedish Government to involve those people who are unfamiliar with computers and mobile phones – mainly the older people living in rural areas.