Say What Wednesdays

Swiping left and swiping right – living in a cashless society

Welcome to Say What Wednesday! Today’s question comes from Katherine.

“I heard a story on Hack the other day about Sweden becoming a cashless society – Can you explain this further? Is it a good thing and should we be looking at doing the same thing in Australia?”

Sweden going cashless:

  1. This is not a government regulated change – it’s based on the behaviours of the population. Individuals are choosing “cashless” over cash transactions
  2. Already considered to be the most cashless society in the world.
  3. More Swedes have access to a payment card than to cash, according to data from the country’s central bank, Sveriges Riksbank, or simply Riksbanken. And the overwhelming majority of the nation – 85% – have access to online banking.

How does it stack up?

  1. Circulation of notes and coins as a percentage of gross domestic product (GDP)
    • Sweden: Just 2% of the total value of transactions in Sweden consist of cash
    • Australia: About 4.2% of GDP
  2. Cash transactions in stores
    • Sweden: 20% of payments in shops are made in cash
    • Australia: Was 70% in 2007 but has declined to about 35% now
    • UK: 42% of all retail transactions

The Central Bank is worried:

  1. The situation has gotten to a stage where the Central Bank has had to warn the public about the rapid rate at which physical cash is being phased out of Swedes’ lives.
  2. Reliance on only a handful of third-party payment systems: Riksbank Governor Stefan Ingves, “a completely cashless society would mean a small number of commercial players being responsible for all payments in Sweden, posing a threat to the infrastructure for payments”
    • A cashless Sweden could be unprepared if faced with a crisis, he added.
    • Demand for cash would likely increase in a crisis situation
  3. Some people don’t have the ability to go cashless
    • Elderly people and refugees are among those that would need access to physical cash

Sweden could eventually “reach a situation where legal tender is no longer an efficient medium of exchange”

  1. This means you would eventually lose the ability to exchange your cash for goods and services, and therefore the currency loses its value.
  2. Already some businesses are no longer accepting cash
    • There are other reasons – It’s not actually safe to carry cash around (crime), plus there are issues around counterfeit money. It helps safeguard the stores from robbery.

A cross-party parliamentary committee in Stockholm is currently reviewing central bank legislation to examine whether banks should be forced to provide cash services for their customers.

  • Increasingly bank branches are refusing to offer over the counter cash services, due to weakening demand.

Why is this occurring?

  • Sweden is a unique economy when it comes to payments. It’s home to a popular instant payment app called Swish, set up in 2012 by seven of the largest banks in the country. More than half of Swedish consumers are signed up to the app.

Government and Central banks

The public sector is required to facilitate people’s access to cash, and to help enable people to living within society.

  1. It all depends on the likelihood of the country’s legislative tightening of the central banks and legislation creating protection for cash
  2. An option being tabled by the central bank is a government-backed virtual currency called the e-krona.
    • The project is currently in its second year of a two-year pre-study.
  3. The central bank is not keen on the idea of cryptocurrencies.
    • A very poor version of money – not a stable store of value or an efficient means of exchange
  4. There is also the idea that government-controlled banks could issue electronic cash
    • May open the floodgates – personally I don’t think it’s a good idea to do this. It has been done before and ends in hyperinflation, for two reasons;
      • Loss of confidence in economy – expropriation of resources – increases political risk (demand)
      • No control on limiting money supply (supply)

What are the effects of not having cash in society?

  1. Black market economy gone
    • In Australia – there is a lot of cash held in $100 bills
    • Increased tax revenues – GST, Company and income taxes
  2. Absolute control over transaction – the Government can block you from spending money
    • It’s a way to be able to control the monetary flows
    • baring transactions
  3. Tracking – Can be tracked in spending

Thanks for the question Katherine! If you have a question or want to know more about any of the topics we discuss, get in touch via our contact page

Understanding foreign currency

Episode 31 Understanding foreign currency Welcome to Finance and Fury. Before I start I want to say a massive ‘Thank you’ to our listeners. We cracked 150k downloads in the first 6 months which is phenomenal. Also, thank you to everyone who has taken up the course – I...

Say What Wednesdays: Should I lock in a fixed rate on my home loan with interest rates so low?

Say What Wednesdays Should I lock in a fixed rate on my home loan with interest rates so low? Welcome to Say What Wednesdays – Where we answer your questions about personal finance and the economy! This week’s question comes from Michael. His question related to...

Say What Wednesdays: Financial Advice – The process, the costs, and if seeking advice is for you

Welcome to Finance and Fury, the Say What Wednesday Episode, where every we answer questions from you guys! This week’s question comes from Nelson, “Hi mate, Love the podcast. Admittedly don't agree with some of your more conservative political opinions but that aside...

Current Australian Share Market

Episode 39 Current Australian Share Market Welcome to Finance and Fury Shares are at almost the same price as 2 years ago in Australia – What is happening? Mid Dec 2016 – 5,580 and last week the 3rd of December – 5,667 Today – is it a great time to buy some shares or...

Say What Wednesdays: What’s an Education Fund and what are the tax benefits?

Say What Wednesdays What's an Education Fund and what are the tax benefits? Welcome to Say What Wednesday! This week the question comes from Sean, "You spoke about Education Funds in a recent episode, I’m just wondering if you can explain this further?" In this...

The pros and cons of purchasing property overseas

Episode 36 The pros and cons of purchasing property overseas Welcome to Finance & Fury. Today we’re back talking again about property…and more specifically, buying property overseas. Some Australians have given up on the dream of buying property in Australia due to...

The Great Debate! Managed Funds vs ETFs vs LICs…what they are, how they work and what’s best to invest in

Episode 9 The Great Debate! Managed Funds vs ETFs vs LICs...what they are, how they work and what's best to invest in. The debate! (it’s not time for a math debate, there will be numbers) Please do listen to our episode “Pay yourself” first The choices are: Managed...

Furious Fridays: When $1 could buy you a pair of patent leather shoes – Is it true that all fiat currencies eventually become worthless?

Furious Fridays When $1 could buy you a pair of patent leather shoes: Is it true that all fiat currencies eventually become worthless? In today’s Furious Friday episode, we’ll be running through the historical life cycle of fiat currencies. This episode is thanks to...

Furious Fridays: Is progressivism the destroyer of equal opportunity?

Welcome everyone to Finance and Fury, the Furious Friday edition. Today’s episode is part 5 of the miniseries. The last part looked at the ‘fair go’, what is fair for some, isn’t for others. Nearing the end of the series, I want to put forward a case. The constant...

Say What Wednesday: Paying your home loan off with debt

Say What Wednesday Paying your home loan off with debt How can you pay off a mortgage with debt? Velocity banking and Offset accounts This question comes from Tom a podcast listener. He asks “Just wondering if you have ever used Velocity banking at all to pay down...

Pin It on Pinterest

Share This