Building a Cashless Society

Money is a central part of everybody’s life and every society and has been more important for humanity than the wheel, the printing press, the steam engine, and the Internet. Money is one of the greatest innovations in our history! I therefore decided to write this book about money.

Why should a book about the future start in a journey into the past? Well simply we cannot understand possible futures if we do not understand the past. One of the first things you learn when doing scenario analysis—studies of potential futures—is that the secret to the future rests in the past. The future will not be like the past since it almost by definition will be different from the past, but the future will be shaped by the past.

A global trend in retail payments is that noncash transactions grow steadily but that cash transactions still are important—especially when it comes to low-value payments—and even increasing in some countries. The World Payments Report (2017) shows that cash in circulation in relation to GDP decreases in a small number of countries—Sweden, Denmark, the UK, Canada, and South Africa—while overall trend is that this ratio is stable or increasing. The trend is continuing globally where noncash transaction grew globally with 10.1% in 2016 (World Payments Report, 2018).

The Swedish payment system can be said to have started in 995 as the first Swedish coins were minted in Sigtuna as a response to an increased trade between European merchants. This helped and stimulated trade between Swedish and foreign merchants and thereby became important for the economy in the cities that made the cornerstones of these societies. However, the system was not well developed until the beginning of the seventeenth century when the first banks were created as the chancellor of the realm Axel Oxenstierna stressed the need for banks that could create a better connection between savings and lending in Sweden. As most of the times, this also was in the interest of the King of Sweden Karl X Gustav who was fighting wars in Poland and in need of money to finance the war efforts.

The use of cash in Sweden peaked in the end of 2007 and has been decreasing ever since (Table 1.1). The decrease in 2017 has been remarkable when looking at value of cash in circulation. The value of Swedish cash in the end of October 2017 was 26% (!) lower than in the end of 2016. The decrease since the peak in 2007 is over 50%. And it should be noted that this decrease is mainly a result of how the so-called market—banks, merchants, and consumers—supplies and demands cash. The main action by the state—or rather the Riksbank—in this period is to have decided that new bills and coins are introduced in the period from 2015 to 2017. When studying Table 5.1, it seems that the introduction of new bills and coins has had a negative effect on the use of cash where some of the decline is caused by the fact that all old cash is simply not returned to the central bank at all. There were cash with a total value of 8 billion SEK that had not been returned to the Riksbank by October 31, 2017, and thereby no longer were legal tender. This means that around a third of the decrease of cash in circulation was bills and coins that lost their status as legal tender in June 2017 but that nevertheless were not returned to the central bank. Despite this large temporary reduction due the new bills and coins, the decline was strong and critical.

One way of understanding transformation of industries and technologies is to apply a so-called socio-technical analysis, which is based on the prerequisite that it is only by understanding the interplay between several critical factors that makes it possible to grasp how and why transformation happens. We cannot study technological innovation in isolation if we want to understand change. Nor can we study organizational or individual behavior or factors such as politics, culture, laws, environmental aspects, or internationalization in isolation. Complex patterns of transformation are ideally studied by acknowledging this complexity while at the same time trying to reduce this complexity into understandable patterns and structures.

I have discussed, explained, and shown many different aspects and dimensions related to a transformation toward a cash-free society, but I believe something is missing. The complexity of this change process cannot be fully understood if we do not listen to some of the voices of those most severely influenced by the transition. What do people think about this, and how do they live their lives in Sweden today? Then I do not mean people in general, but rather, how do people make payments and how do they receive money? The data and numbers presented in previous chapters tend to refer to a general image of what is happening, but how do people actually handle payments? This cannot be seen in numbers but needs stories. Here are stories that reflect different aspects of living in a close to cash-free society.

Many may argue that it is possible to see a society without cash. Cash is—as I have argued—one of the most important innovations in the history of humanity. Could and should we get rid of that? Many are convinced we must keep cash, while others welcome a transition toward a cashless society.

One important lesson from this story of how Sweden is becoming a cashless society is that the process—if becoming cashless is seen as a goal—cannot be governed from above. A top-down driven approach is not likely to succeed as a stand-alone strategy. This is not to say that governments and central banks should leave it to the market.

The development in Sweden has a long tradition from the middle of the twentieth century where actions and cooperation between critical actors have promoted electronic payment services. This has created a banking and payment system where the backbone is made of electronic bank accounts into which wages and salaries are paid which then serves as the base for all kinds of payments. The payment system is constituted on these accounts and payment services—cash, cards, invoices, Internet banking, mobile payments, and others—must connect to them. The inner “DNA” of the system is electronic.