Sweden leads the way to a cashless society

After living for more than four decades in the Southern Hemisphere, I visited my country of origin, Sweden. I noticed many changes but this article is only going to be about money, or perhaps I should say the lack of cash.

Don’t get me wrong. The country is not poor. Affluence is abundant. Houses are well-kept, most cars are late models and many people travel extensively during their holidays. During my four months in the country, I only used cash once and that was to pay for a punnet of berries from an old lady at a farmers’ market. Very few people use cash today, only credit or debit cards. Parking meters only exist in the cloud. You pay, either with a card or, better, with a special app. Very few banks handle cash anymore, perhaps two or three offices in a city of 700,000 people and you have to make an appointment.

The sight of people with bags of money queuing at the bank to deposit money is long gone. Many businesses refuse to take cash as it is inconvenient. Although paying with card happens in other countries too, the transactions seem to go much faster in Sweden, especially when the BLIP function is used. But what do you do when you need to pay somebody who does not have merchant credit card facilities? Simple, you use Swish.

The banks in Sweden have together created a system whereby you can instantaneously transfer money from your bank account to somebody else’s using your mobile phone. You just need two apps: Mobile BankID and Swish. You open the Swish app, enter the phone number of the recipient and the amount. The BankID app will come up automatically and you confirm with password or other means. Done in a flash (or swish). The service is free for private individuals, but not for businesses. Swish is only available in Sweden right now but five other European countries are set to introduce it.

In the past, a lot of people, especially from eastern Europe would come to Sweden and for cash offer their services of maintaining and refurbishing private houses at very competitive prices. They could do this because they were not registered, paid no tax or 25 per cent VAT (known as GST in NZ) and came from a country where the cost of living was lower. The Government solved this by allowing all home owners substantial tax rebates for home improvements. But only if legitimate service providers were used. So now it is no longer attractive to use anybody else. As a bonus most houses are now well-maintained.

All these cashless transactions are extremely convenient but what are the drawbacks? What happens if you cannot contact the bank’s internet server? We can only hope that the designers have built in sufficient redundancy that another server can take over seamlessly. Then there is the question of leaving a digital track of all your purchases and incomes. Some people may feel uncomfortable with the fact that everything is in theory traceable. The Swedes do not seem to worry about that, but the Germans apparently do. During a visit to Germany I was in a long queue at a supermarket and everyone except me was paying with cash. I was told that the Germans, although they have the technology, distrust the system. Perhaps it is a hangover from the time when a dictator ruled the country.

Traditional bank robbers would have a hard time. There are very few banks carrying any cash and even if somebody were to get hold of a bag of cash, the largest denomination is only worth about $80. And then what would you do with it when nobody accepts cash? You could not deposit it to a bank account without explaining where you got it from. The strict banking regulations are not unique to Sweden. So, the modern bank robber is an IT expert. The banks are cagey about how much they lose due to fraud but allegedly it is in the millions. But that cost is said to be far less than what it would cost to go back to the old system. And that is the reason why you could expect all other countries to follow in the footsteps of Sweden. Money talks.

So, the modern bank robber is an IT expert. The banks are cagey about how much they lose due to fraud but allegedly it is in the millions.