Sweden’s transition from Cash to Cashless economy

Authors: Clarice Lim and Harsh Didwania

Region Head: Sasthaa Gingee Babu

Editor: Sakshi Sanganeria


In this paper, the authors will be taking a look at Sweden and their gradual transition from a cash based to a cashless economy. The authors look at the transition, reasons for doing so and also some resistances to the idea. The end of the paper will have a section dedicated to the future of E-Krona, the digital currency that the country will properly roll out in 2021.

Sweden went from being the first to adopt banknotes in Europe in 1661 to introducing its own digital currency in 2021, and becoming the world's first cashless society in 2023.

For the past several years in Sweden, almost all purchases have been paid for electronically by debit/credit card using chips and pins rather than old-fashioned magnetic bands, contactless technology, or the mobile application Swish, which was especially designed to help Swedes embrace a cashless lifestyle. More than 80 percent of all retail transactions have been conducted electronically. This is similar to the rest of the Nordic countries, which include Finland, Norway, Denmark, and Iceland, but is in contrast to the southern countries of Europe.

Transitioning into a Cashless Economy:

Swedish banks issue debit cards to citizens aged seven years of age or older (with parental permission), which translates to more than 97 percent of the population. This introduces them to the cashless society that will be part of their future.

Cash accounts for less than 1 percent of the total transactions in Sweden. More than 99 percent of merchants accept debit cards, and consumer payments with cash are less than 20 percent of total transactions. Over 80 percent of all transactions are cashless, an increasing trend.

Stockholm's public transport stopped accepting cash. Tickets are pre-paid, paid by using a mobile application, or bought by debit/credit card from the driver, or a ticket machine. Residents usually buy a monthly travel card, which is both more convenient and less expensive than buying individual tickets.

A fifth of Swedes, in a country of 10 million people, do not use automated teller machines anymore. More than 4,000 Swedes have implanted microchips in their hands, allowing them to pay for rail travel and food, or enter keyless offices, with a wave. Restaurants, buses, parking lots and even pay toilets depend on clicks rather than cash.

Reduction in Crime Rates

Some of the reasons to move away from cash include making transport more secure, which has already been accomplished in the Swedish capital, and reducing bank robberies and drug, counterfeiting, and weapons markets. It also means less tax avoidance. Bank robberies have considerably decreased in the past years; since there is no cash in most banks in Sweden anymore. Establishment owners feel safer without having any visible cash. Cost Benefit and Economic Benefits

One of the most famous and recent cost-benefit analyses focusing on Sweden was conducted by Segendorf & Jansson (2012) on behalf of the Riksbank. In this study, the different cost structures for cash and card payments were analyzed. In turn, the authors concluded that debit cards are the cheapest payment option compared to credit cards and cash payments. In turn, an increased usage of debit cards relative to cash would increase the efficiency of Sweden’s payment system. However, a transition towards a cashless society would only be beneficial if debit cards replace cash, and negative if replaced by credit cards.

This is due to the different cost structures of cash, credit, and debit cards. Costs for debit cards include transaction handling, information technology and communication, customer service, payment authorization and other controls/checks. Costs for credit cards include marketing, credit testing, customer service and bonus programs. Costs for cash include printing, transportation, deposits, withdrawals, personnel costs related to counting cash sales at the end of each day, back-office administration, and the largest cost for consumers is seigniorage and fees to banks as well as the time to perform a cash transaction.

In addition, cash payments generate other indirect costs such as safety costs, work time, administrative information, other insurances for cash handling, as well as the risk of the cash handling system going out of order, and the risk for robbery. For example, the Swedish Commerical Employee’s Union estimates that the direct cost of a robbery is 100,000kr ($12,427) and covers costs for work time spent with police and staff, sick leave, reduced operating hours, and loss of sales due to lost customers. However, the Riksbank is making a sizable profit from 11 seigniorage, which in 2009 reached 5.8 billion kr ($7.2M), whereas the banks are suffering a loss from their cash operation as they bear the major costs.

Sweden is slowly moving towards charging negative interest rates as the money in circulation continues to fall. If customers are charged negative interest, they would either choose to spend their money stored in the bank and avoid having to pay the interest or continue to save their money in the bank but be subjected to the negative interest (Edwards, 2015). The negative interest rates serve to push its depositors to spend their money on goods and services rather than let it accumulate in the bank as savings, which can result in an increase in economic growth of the country, benefiting the economy in the long run.

Resistance to Going Cashless

As the possession of physical cash gives low income individuals a greater sense of security and control, removing the option to use cash would thus create a sense of uncertainty and vulnerability. Rural areas might not be equipped with the physical infrastructure required to facilitate the use of digital payment, thus going cashless would pose a whole host of issues. Approximately 10% of its 10 million population (Detrixhe, 2019), which includes retirees, refugees and the homeless, lack the capabilities to transition to using digital payment, and are thus not keen on going cashless.

Moreover, as going cashless requires the use of electricity and technology, there will be catastrophic consequences in the event of a cyberattack or power failure (Savage, 2019). The invasion of privacy is also a key concern as going cashless would mean that there would be digital trails left behind, which would make it very easy to trace anyone. There is also a possibility of a data security breach, as seen in the 2017 Equifax intrusion which saw hundreds of thousands of credit card details being stolen from Visa and Mastercard (Bernard et al., 2017), which could exacerbate the issues of identity theft and fraudulent transactions. Additionally, the passing of negative interest rates by banks onto consumers makes it more costly for them to store deposits in the banks, making going cashless an unfavourable move for many.

Future of E-krona - the Riksbank’s Plan to Issue Digital Currency

Sweden’s central bank, the Riksbank, developed its digital currency - the e-krona, to ensure that there’s a functional payment system for the country and to reduce the over-reliance on banks (Hedman, 2018). Not only does the Riksbank intend to make its digital currency a public good that is not driven by profit, but it will also prioritise creating a user-friendly and accessible platform for digital payments (Orcutt, 2020).

Switching from using Central Bank notes and coins to the e-krona would mean that the population would be relying heavily on the private sector to make payments as well as access their cash. Currently, it is legal for retailers, restaurants and other firms to refuse cash payments. On a whole, Swedes are able to adapt to new technology quickly and more than half of the population has downloaded Swish, the instant payment app. Swish works by connecting a bank account with a mobile phone number to enable the easy and efficient transferring of money from one person to another (Fawthrop, 2019).

However, as the e-payment system is heavily reliant on a small pool of private operators, this may increase the vulnerability of payments as there will be an extensive impact if any of these operators face disruptions. As such, in addition to ensuring a strong, reliable supply of electricity and communication networks, the government ought to develop alternative solutions that can be adopted in the event of major disruptions- as they have a responsibility to ensure that the payment market is sufficiently resilient and reliable.

As it is evident that going cashless may lead to certain drawbacks and challenges for some individuals, it is imperative that the government step in and require businesses to accept cash alongside e-payments so as to cater to the differing needs of society and reduce the risk of financial exclusion when cash is removed from circulation. In addition, as small vendors tend to accept Swish as the sole payment method, it is not possible for tourists without Swedish bank accounts to pay by Swish, thus making the payment process very challenging and complex (Rosenfeld, 2019).

As such, the central bank ought to ensure accessibility and simplicity of the system, and aim to develop an e-krona which complements instead of replaces cash completely (Gifford, 2020).

Table 4.2.3

Number of transaction, millions

2012 2013 2014 2015 2016


Card Payments 2190 2398 2620 2845 3173


Debit Cards 1810 1987 2170 2404 2672


Credit Cards 380 411 450 441 501


Credit Transfers 859 894 957 1074 1303


Electronic 789 827 888 1016 1244

Source: Riks Bank

Table 4.2.3 helps in understanding the number of transactions in millions from the year 2012 to 2016. It has witnessed that the card payments, credit transfers and direct debits have increased from year 2012 to 2016.

Table 4.2.1

ATM withdrawals are decreasing

Year 2012 2013 2014 2015 2016


Number of ATMs 3416 3237 3231 3285 2850


Number of transactions (millions) 214 183 167 154 136


Transaction value (SEK billion) 193 174 171 153 108

Source: Riks Bank

The table (4.2.1) shows that ATM withdrawals are decreasing with time (2012-2016). The reason is banks are also decreasing their ATMs and their goal is very clear that they want to be the first cashless society in the world. The number of ATMs are decreased from 3416 to 2850 from the year 2012 to 2016

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