Mak­ing of a ‘cash­less so­ci­ety’

Banking Frontiers - - Highlights -

Swe­den is set to be­come a to­tally cash­less so­ci­ety in March 2023 - 24 March 2023 to be pre­cise. Jonas Hed­man, who is an as­so­ciate pro­fes­sor at the depart­ment of dig­i­tal­iza­tion at the Copen­hagen Busi­ness School, who did a study on the prospects of the coun­try be­com­ing cash­less, says he and his team ar­rived at this pre­cise date af­ter a sur­vey of some 750 re­tail­ers and their cash man­age­ment costs and the de­cline of cash in cir­cu­la­tion in the coun­try. He ex­plains that when cash trans­ac­tions fall below 7% of the to­tal pay­ment trans­ac­tions, it be­comes costlier to man­age cash than the mar­ginal profit on cash sales. When this hap­pens, an eco­nom­i­cally ra­tio­nal re­tail man­age­ment should stop ac­cept­ing cash, says he. He also clar­i­fies that what is meant by cash­less so­ci­ety is a so­ci­ety where cash is not a gen­er­ally ac­cepted means of pay­ment. There might still be bank notes and coins, but you would not be able to use them in a prac­ti­cal sense.

One thing in­ter­est­ing about Swedish laws is that con­tract laws have a higher prece­dence over bank­ing and pay­ment laws. For ex­am­ple, if an es­tab­lish­ment puts up a sign that it does not ac­cept cash, then the cus­tomer who en­ters the store is en­ter­ing into a con­tract or an agree­ment with that store that it does not ac­cept cash. In most of the coun­tries, pay­ment laws are above con­tract laws. Hed­man says this is one of the key rea­sons why Swe­den is more cash­less than other coun­tries.

Swe­den has seen wide­spread use of pay­ment cards from way back in the 1950s. Bank ac­counts were dig­i­tized start­ing the 1960s and in­ter­net came in the 1990s. The cen­tral bank also de­clared that it did not see cash as its core busi­ness and out­sourced print­ing and dis­tri­bu­tion of cur­ren­cies. A move to­wards cash free so­ci­ety was also ini­ti­ated by the or­di­nary peo­ple like bus drivers, cab drivers, bank em­ploy­ees, etc, who came to be af­fected by rob­beries in the coun­try. Dur­ing 2015-2017, the coun­try re­placed its ex­ist­ing notes and coins with new ones. When this hap­pened, ci­ti­zens de­posited cash into bank ac­counts but all of it was not taken out. To­day, most of the bank branches are cash-free and it is dif­fi­cult to find a bank that ac­cepts cash. Only ATM ma­chines - they are rare too ac­cept and dis­pense cash.

Swe­den’s cen­tral bank is also plan­ning to launch a dig­i­tal cur­rency, which will mean that peo­ple will have to de­pend less on banks.

Sur­pris­ingly, there is some muted op­po­si­tion in the coun­try to­wards cash­less so­ci­ety. There is what is de­scribed as Kon­tan­tup­proret (cash re­bel­lion), the pro­tag­o­nists of which say they are con­cerned about iden­tity theft, ris­ing con­sumer debt and cy­ber at­tacks. More sur­pris­ingly, the move­ment is led by a for­mer head of po­lice and re­tired peo­ple are the ac­tivists. How­ever, it is seen as a con­cern of the el­derly peo­ple, who want to know what could be done in case there is a break­down of the in­ter­net or there is dis­rup­tion of the elec­tric­ity sup­ply.

As In­dia makes its push to­wards dig­i­tal, Swe­den is in­deed a worth­while case study.

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