Sweden Transitioning To Cashless Economy

CBS News reported Sunday that Sweden is on the path toward getting rid of paper currency, i.e., Sweden is becoming a cashless society. The article suggested that Swedes who are fond of paper money may be frustrated with the transition toward digital currency. From the article: "In most Swedish cities, public buses don't accept cash; tickets are prepaid or purchased with a cell phone text message. A small but growing number of businesses only take cards, and some bank offices -- which make money on electronic transactions -- have stopped handling cash altogether."

According to the article, there are currently towns in Sweden "where it isn't at all possible anymore to enter a bank and use cash." In this way, "that's a problem for elderly people in rural areas who don't have credit cards or don't know how to use them to withdraw cash." Even further, one church in southern Sweden has installed a card reader so that church-goers can make offerings via digital means.

According to the article, paper money and specie represent only 3 percent of the Swedish economy. In comparison, paper money and specie make up 9 percent of the Eurozone economy and 7 percent of the US economy. CBS News quoted former ABBA member Bjoern Ulvaeus as commenting on the Swedish move, "I can't see why we should be printing bank notes at all anymore." From the article: "After [Ulvaeus'] son was robbed for the third time he started advocating a faster transition to a fully digital economy, if only to make life harder for thieves."

Understandably, the move toward a cashless society appears to be having positive effects in terms of crime: "The number of bank robberies in Sweden plunged from 110 in 2008 to 16 in 2011." The move to cashless society could also have implications for the ability to counterfeit currency. In addition, less cash in the public's hands would appear to reduce the feasibility of street muggings and black market transactions. However, the coin has two sides as with the decline of cash in Sweden, "computerized fraud cases, including skimming, surged to nearly 20,000 in 2011 from 3,304 in 2000."

The article noted that even in light of the transition toward digital currency, "[m]ost experts don't expect cash to disappear anytime soon, but ... its proportion of the economy will continue to decline as such payment options become available." According to former Sveriges Riksbank's deputy governor Lars Nyberg, paper money and specie will survive "like the crocodile, even though it may be forced to see its habitat gradually cut back." The moral of the story would appear that if you're collecting Swedish kronor, collect them while you can. In the wake of the transition toward a cashless society, whereas one US dollar was worth 8.1657 kr on March 20, 2009, one US dollar today is worth 6.756 kr.

I recently discussed the use of virtual currencies with respect to online transactions and commercial exchange. While the use of digital currency may have its advantages, it would appear that there is yet something to be said for having a fistful of dollars. It would appear that though the reduction in the amount of physical cash flowing in society may deter some criminals, other criminals may seek to take advantage of a cashless system via electronic means. That being said, the course of Sweden would seem to suggest that a cashless society is going to be the wave of the future.

Could such transitions become the norm in the US in the near future? Even with the prospect of greater ease in using digital money, it is important to recognize that with the US dollar's status as a global reserve currency, the possession of the physical US dollar is still important for not only the domestic economy but also global trade. As such, there would appear to be both societal and economic barriers to an American transition to a cashless society.

Even further from societal and economic barriers, such a move to absolute cashlessness in American society could possibly raise questions related to the privacy of financial transactions and (particularly in the case of a possible RFID-chip based currency) questions related to the respect for one's person and even possibly religious freedom. (It would appear that there are practical limits to the science fiction concept of simply waving one's chip-embedded wrist under a checkout reader in order to buy a bottle of soda for 1.50 credits.) Thus, despite the possible benefits of only using digital currency, there would appear to be significant societal and economic obstacles to the realization of an absolutely cashless society.