by Wolf Richter, Wolf Street:
It’s too risky and systematically excludes the most vulnerable people.
There are small but growing signs that Europe’s “War on Cash” is not going exactly according to plan. First, a number of central bankers began voicing concerns about its potential ramifications. Now, even in Sweden, the first European country to enlist its own citizens as largely willing guinea pigs in an economic experiment — negative interest rates in a cashless society — public support is beginning to waver.
Initially, the plan was so successful that by 2017 the amount of cash in circulation had dropped to the lowest level since 1990 and was more than 40% below its 2007 peak, earning Sweden a reputation as the world’s “most cashless nation.” The declines in 2016 and 2017 were the biggest on record. An annual survey by Insight Intelligence found that in 2017, only 25% of Swedes paid in cash at least once a week, down from 63% just four years before; and 36% never used cash at all, or just pay with it once or twice a year.
But that doesn’t mean everyone is on board. In a recent survey, an overwhelming 68% of the respondents stated that they would not like to live in a fully cashless society. The survey, commissioned by Bankomat AB, an ATM chain company representing an alliance of Swedish banks that admittedly has a vested interest in preserving cash’s role as a means of payment, polled over 2,000 people aged 18-65.
Opinions differed markedly between age groups but in no single demographic was there a majority in favor of abolishing physical currency. Among the 18-29 year old respondents 56% declared that they still want to keep cash while 38% said they would welcome a cashless society. Among the survey’s oldest demographic, the 65-year-olds, 85% wanted to keep cash.
Only one in four Swedish people support a fully cashless nation. The views on cash expressed in the survey varied sharply between inhabitants of small towns and those in large cities. The proportion of cash advocates was lowest in the country’s capital Stockholm, and highest in more rural areas such as Västmanland, Värmland and Kalmar counties.
The survey’s findings were published as the pace at which cash is vanishing in Sweden is even beginning to worry the same authorities that wanted to get rid of it. If physical money disappears too quickly, it could be difficult to maintain the infrastructure for handling cash, one Swedish official recently warned. And that may be enough to spark a crisis.
Most of the country’s bank branches have stopped handling cash altogether and many shops and restaurants now only accept plastic or mobile payments. As a result, many people who struggle to navigate the digital system, or who don’t have credit cards, in particular the elderly, are finding themselves increasingly locked out of the country’s payment system.