Sweden sees risks of cashless society

Sweden seems to be aware of the risks of a so-called cashless society. The Swedish central bank fears that the disappearance of coins and banknotes from everyday payments will lead to a complete disintegration of the infrastructure associated with the distribution and use of cash. And that, according to the central bank, undermines its task to ensure a safe and efficient payment system.

The amount of coins and banknotes in circulation in Sweden peaked in 2007 and has since fallen by more than 40%. The amount of cash today is back to 1991 levels, which means that, adjusted for population growth and inflation, there is much less cash per person in circulation today than there was then.

Due to the decrease in the amount of coins and banknotes, it is becoming increasingly expensive for banks and companies to maintain the infrastructure of cash trucks, safes and ATMs. As a result, it will only become more interesting for businesses and consumers to switch to electronic means of payment such as bank cards, smartphone apps and internet banking. But is that a problem?

Cash as a backup

Electronic payment systems offer many advantages over using cash, but the disadvantage is that electronic systems can be affected by malfunctions and by hacker attacks. In such scenarios, it is useful if consumers and businesses can fall back on coins and banknotes. Especially in the remote areas of Sweden, the availability of cash threatens to become a problem, as it is relatively expensive to supply businesses and banks there.

Patrik Andersson of CIT Loomis stated in an interview with Bloomberg the importance of maintaining a cash infrastructure. According to him, many Swedes do not realize the effect that the failure of electronic payment systems has on daily life. The population has a lot of confidence in the stability and availability of these systems, but in a crisis situation this can lead to Swedes no longer being able to pay for basic things such as groceries.

According to Nina Wenning of Bankomat (the company that operates most of the ATMs in the country and is owned by several Swedish banks), the cost of each ATM transaction has increased dramatically in recent years. This is because it is used less and less often, while the costs for cash transport and insurance are hardly going down.

Cash in circulation in Sweden has declined sharply in recent years (Source: Bloomberg)

Gold and silver as a safe haven

Just as cash is a means of payment to fall back on in times of crisis, precious metals such as gold and silver are savings to fall back on in uncertain times. Gold Coins and Silver Coins may not be as convenient as a means of payment, but they will retain their purchasing power in times of crisis.

Especially when currencies lose value and banks cannot meet their obligations and are settled in accordance with the bail-in. For that reason, it is always advisable to keep both cash and precious metals on hand.