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

Say What Wednesdays: The Trump Economy

Say What Wednesday The Trump Economy Today, we’re talking about the Trump economy, and the state of the US market. Love him or hate him, America is doing better than ever – Trump just can’t stop winning when it comes to a lot of political and economic factors. In his...

Commercial v Residential Property; the pros and cons if you’re considering investing

Episode 23 Commercial v Residential Property; the pros and cons if you're considering investing Welcome to Finance and Fury In today’s episode we’re talking about property - Commercial vs Residential. It’s often a question people ask when they’re looking to start...

Say What Wednesday: Why is it unlikely the world economy will move away from Oil?

Welcome to Finance and Fury, The Say What Wednesday edition, where we answer your questions. Today we have a question from Nick - Watching the Leonardo Di Caprio documentary about global warming, which touched on how the large oil corporations used bribes to corrupt...

(Intro Series) Translating Finance

Intro - Episode 2 Translating Finance Welcome to Part 2 of this intro series to Finance & Fury. Today I wanted to start this episode off with getting you to imaging you’ve hit the lotto jackpot! Say for instance, you’ve got a guaranteed million dollars per annum...

Goals for the New Year

Welcome to Finance and Fury Welcome to the new year, depending on when you listen it may be new year’s eve or the new year  Hope you are in for a good night, or not recovering from one. Starting off with a question; looking back on the year, are you in a better...

Bullish Shares versus Bearish Bonds – which one is correct?

Welcome to Finance and Fury The ASX is sitting around a high mark.  But there is a lot of talk about recessions, analysis talking about share corrections, not a lot of optimism – Has there ever been?   Don’t really see many articles with positive outlook on the...

Buying Property inside an SMSF: Tips and traps, what works and what doesn’t

Say What Wednesday Buying Property inside an SMSF: Tips and traps, what works and what doesn't Welcome to Finance and Fury, 'Say What Wednesdays' where each week we answer your questions. This week's question is from Sandeep: “Hi, Can you please talk about how to...

Furious Fridays: Is minimum wage such a good thing after all?

Furious Friday Is minimum wage such a good thing after all? Welcome to Finance and Fury! The main aim of our Furious Friday editions is to clear up misconceptions. We’ve been seeing a lot of news stories lately about companies underpaying staff – 7-Eleven, hospitality...

Gender pay gap, porn, and becoming “in demand”

Episode 1 Gender pay gap, porn and becoming "in demand" Welcome to the first episode of Finance and Fury and today we're going to be setting the scene for the rest of the podcast. The whole podcast is about helping to solve misunderstandings… and one really big one is...

Say What Wednesdays: Covering your asssssets in a relationship

Welcome to Finance & Fury’s, ‘Say What Wednesday’, where each week we answer questions from you all. This week our question comes from Tara;   “Hi Louis, what do you think are some financial considerations when it comes to a relationship? - Should you have a...

Pin It on Pinterest

Share This