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Take note: it’s the cashless economy, stupid

In a country that has done more than any other to banish physical coins and notes, politicians are limbering up to fight a general election. Could the so-called ‘war on cash’ spark a ballot-box backlash?

Economic concerns are often on voters’ minds when they go to the ballot box, but money could be an issue of a different sort at a general election later this year.

Welcome to Sweden, arguably the world’s most cashless society. This Scandinavian powerhouse takes pride in its self-image as “the country of the future”, according to E&T’s Europe correspondent Pelle Neroth, who follows Swedish politics closely.

In recent years, coins and notes have become increasingly scarce in the pockets of the country’s nine million inhabitants. This process has taken place largely organically because of decisions made by private banks, as opposed to being government-led, but the changes have nonetheless caused tensions.

Only a minority of Swedish banks’ retail offices now handle cash. ATMs are increasingly rare. In the cities in particular, more and more businesses are becoming cash-free zones. The number of card transactions taking place is constantly rising, as is the overall value of these transactions. It is becoming ever more difficult both to obtain and to use cash, but the rush to reject ‘old money’ has left some people feeling left behind – a sentiment that populist parties could be poised to exploit.

Björn Eriksson leads an organisation called Kontantupproret (‘Cash Uprising’) and is also the head of a group that lobbies on behalf of the Swedish private security industry. He believes the threat to physical currency will be a significant issue on the campaign trail. The influential Pensionärernas Riksorganisation, or National Pensioners’ Organisation, is among those groups that are becoming exercised by the issue.

“Remembering Brexit and remembering Trump, I think politicians are starting to notice that, in a broad sense, people are really angry,” Eriksson explains over the phone from his home in rural Sweden. “There is a movement among a lot of organisations to say that the way in which they will behave at the upcoming general election is rather connected with this question of the cashless economy.”

According to Eriksson, rural Swedes are angry at their political leaders. They feel politicians are too focused on the priorities of the country’s wealthier, metropolitan citizens – to the detriment of the national interest as a whole.

“The political system and the media system tend to be rather oriented towards Stockholm, Gothenburg and Malmo,” says Eriksson. “That is not Sweden. It’s a part of Sweden, yes, but it’s not the whole Sweden.”

Coinage is bound up with this in a way that should not be surprising, as it has always been linked to issues of identity. It is no accident that until recently the logo of British anti-EU party Ukip was the pound symbol. The fact that the Queen stares out from English banknotes and coins is probably at least part of the reason why the UK was so opposed to joining the euro.

For Eriksson, who spent many years as a senior police chief and president of Interpol, questions of national security also arise from the process of relinquishing physical currency in favour of contactless cards and digital payment systems like the Swish smartphone app.

“This has got to do with Swedish security,” he insists. “It has got to do with the hardening climate in Europe, the realistic prospect of a situation where, for example, Russia or some other country could decide to do something against us. That’s a big fear. It would be easy to do something against us because it is very easy to make these card systems completely useless.”

Near-field wireless communication systems used to process payments could be brought down by way of concerted cyber-attacks aimed at disrupting the electricity supply network. Such a situation has already arisen in Ukraine, which has been subjected to a series of mysterious blackouts in recent years. The disruption has been blamed on state-sponsored Russian mischief – an accusation denied by the Kremlin. Even in tech-savvy Sweden, outages are not unknown. Examples include the case of the supposedly cashless Bråvalla Music Festival, which descended into chaos after a chip payment system failed.

These concerns have not prevented academics and pundits from predicting the end of cash, however. Niklas Arvidsson, a researcher from Stockholm’s Royal Institute of Technology, says Sweden “may well” go entirely cashless as early as 2030. The country’s central bank is investigating the possibility of issuing so-called ‘e-kronas’ as a digital complement to physical money. It appears that battles lines are being drawn in the ‘war on cash’, as critics are labelling it.

“If cash is eliminated and we rely solely on digital money, this means we are going to need incredibly robust systems that can withstand disruptions, malfunctions, hacking attempts and power outages,” Eriksson claims in a report arguing against disposing of the resilience provided by having backup physical currency.

He adds ominously: “The more sophisticated a system is, the more vulnerable it tends to be.”

For his part Arvidsson is somewhat sceptical about the prediction that significant portions of the Swedish electorate will be galvanised against the cashless economy come election time.

“Björn Eriksson has a point,” he concedes. “It could become a political question, but I doubt it will be controversial. I don’t think any politician could say, ‘Yes, it’s good to get rid of cash.’ The only way to get votes on this issue is to say that we must protect cash for the people.”

He does, however, sound a note of warning about the so-called “digital divide” that is opening up in Sweden and elsewhere.

“There are so many issues connected with digitalisation that create tension and leave some people outside of developments,” he says. “That can definitely become political.”

Financial and societal exclusion for some demographic groups, such as the elderly and ‘underbanked’ people like members of some immigrant communities, could worsen should cash continue to disappear from our wallets and purses.

Enthusiasts for the idea of a cashless economy argue that such potential disadvantages are outweighed by benefits such as the ability to clamp down more effectively on fraud, money laundering, tax evasion and other types of financial crime. There could be savings for taxpayers as truly cashless countries would no longer incur the expense of producing coins and bills. However, retailers could be forced into paying more in fees to banks and payment companies. There are, also, obvious privacy considerations involved in allowing greater state surveillance of people’s financial habits. With so many pros and cons, the issue of the cashless economy does not divide voters neatly along ideological lines.

Professor Anders Ravn Sørensen, who teaches at Copenhagen Business School in Denmark and has written about currencies and national identity, believes coins and banknotes have long held political significance in terms of their design and the ways in which they are circulated.

The disappearance of physical money could indirectly send out political ripples by further dissolving the idea of nation states and undermining trust in national institutions, he says.

“It depends if one is speaking about cashless societies in the sense where you still have national currencies – so electronic money issued by nation states – or if it is a bitcoin thing where the trust in this money is not backed up by any state but is even more diffuse,” says Sørensen. “Is it based on a vague notion of trust in the system, or is it based on some guy doing something with software God knows where?”

Banknotes and coins have been described as “circulating monuments” or pocket cultural mementos reminding their holders of a supposedly shared history and culture. Hence the often ferocious debate about which figures from the past countries should choose to honour on their notes.  

“Coins and notes are actually small commemorative monuments in pocket form that constantly, though unwittingly, remind you of the specific national community you are part of,” Sørensen says. “That’s where trust in the money comes from. It’s based on trust in the Swedish state, in the case of the Swedish krona, or the European Commission, in the case of the euro. With the cashless economy, we will lose that. What will that mean? I’m not sure. I don’t think people will have less trust in the money itself, but we will lose something from the range of symbols that constitutes national identity.”

Perhaps the decline of physical currency will strike its own small blow against the idea of national borders and in favour of greater globalisation. That is a good or a bad thing depending on one’s politics.

The cashless quandary

Small transactions

Solutions to the problem of what to do about small and casual transactions are already being devised in countries where use of cash is declining. India’s demonentisation efforts have been well documented. The country’s Prime Minister Narendra Modi has not faced significant political opposition to his push towards his ‘digital India’ vision, according to E&T’s India correspondent Kavitha Srinivasa. However, mobile phone and internet connectivity can be patchy across rural India, presenting challenges for the uptake of platforms like the Bharat Interface for Money, or BHIM, an app that is helping Indians make digital payments using smartphones.

Meanwhile in the UK, a small number of homeless vendors of magazines like The Big Issue have taken to using iZettle devices, while a mobile app called BuSK allows appreciative audiences to tip buskers and street performers in places like London’s Covent Garden.

Russell Blackman, managing director of The Big Issue, says: “Big Issue sellers are effectively running their own small business, buying and selling magazines, so understandably there are many who are keen to respond to market forces and offer their customers an alternative to cash. There have been several small-scale trials of cashless technology by individual Big Issue sellers, and as an organisation we’re actively exploring partnerships with suitable tech and banking partners in order to allow us to roll out the opportunity to sellers and customers nationwide.”

For some activities, it appears there is no substitute for coins, however. As of yet there appears to be no satisfactory cashless version of tossing pennies into a wishing well or flipping a coin to see which team should kick off at a football match. Yes, this could be done digitally, but would it really be a patch on the simplicity of the analogue version? Street magic tricks – the ones involving cups and disappearing coins – could also be scuppered in an age of digital-only currencies.

E&T readers, please write in if you know of any other ‘cashless killjoy’ fears.

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