Across the globe, there are currently about 500 billion banknotes and trillions of coins in circulation. For the majority of the world’s population, a cashless society is years away.
In Sweden, however, such a reality is becoming increasingly tangible.
Sweden is at the forefront of the move towards a cashless society, with only 13% of payments being made using cash, according to Sweden’s central bank, Riksbanken.
This development has been a rapid one. The number of notes and coins in circulation fell by 30% between 2012 and 2014. It has more than halved in the past decade.
Over the next five years, the amount of payments involving cash could work its way down to zero, according to scientists at Stockholm’s Royal Institute of Technology, the largest and oldest technical university in Sweden.
Riksbanken is a little more hesitant in their estimation and considers it more likely that a cashless society could become a reality in just over a decade.
Cecilia Skingsley, deputy governor at Riksbanken, told the Financial Times: “If you extrapolate current trends, the last note will be handed back to the Riksbank by 2030.”
Abandoning bank notes comes with a number of benefits. Apart from being convenient for customers it also makes it harder to hide cash under the counter and reduces the risk of theft.
However, there are challenges associated with this development as well. Monetary policy is one such challenge.
The limited use of cash has forced Riksbanken’s hand, and made them consider issuing a national digital currency, the e-krona. Doing so would make them the first significant central bank to issue a digital currency.
While many are embracing the cashless society, not everyone is happy according to a X Bloomberg. Stefan Ingves, the head of Riksbanken, recently said that the general public is “enormously frustrated” about what’s going on and that something “will have to be done” according to Bloomberg.
He is calling for legislation to force the country’s banks to handle cash to avoid distorted competition and branch closures. But his plea has been rejected by the Swedish government. Financial Markets Minister Per Bolund argues that such legislation would be unfair and could hurt access to banking services.
“Instead of a cashless bank branch that offers some services, the bank may choose to close down that office completely, simply because it’s no longer profitable,” Bolund told Bloomberg.
“Then you risk getting worse service in the countryside than you would otherwise have had.”