Sweden is on track to becoming the world’s first cashless society in 2023. About 80% of Swedes use a debit or credit card to make purchases (Sweden.se, 2019). A cashless society can be defined as the absence of physical cash such as notes and coins, whilst digital payments gain the upper hand (Dictionary.com, 2019). One factor that certainly is relevant, is the population of Sweden. With an estimated population of 10,040,995 in 2018 (CIA World Factbook, 2018), one may argue that it is easier for Sweden to become cashless than other countries with significantly larger populations. Nevertheless, the impact that a full cashless society has is considerable.
Aside from the intuitive factors that a cashless society is considered more convenient and transparent, but also more prone to hacking, there are other relevant factors.
The Boston Consulting Group (2019) estimates that a cashless society would increase annual GDPs of developing economies by 3 percentage points and developed economies by 1 percentage point. This is due to the increased velocity of transactions and the increased transparency (BCG, 2019).
Theoretically, a cashless society would also have a positive impact on the government, through increased tax surveillance (Berentsen and Schaer, 2016). Transactions via transfers are more easily traceable and executing cash-in-hand-jobs becomes more difficult. Ideally, this would have positive spill over effects of higher tax returns and reduced national debt and more financially stable economies (Berentsen and Schaer, 2016). This does not account for market imperfections though. Illegal activity, such as tax evasion, will most likely continue, as alternative forms of payment emerge, either reversing back to payments in the form of commodities like gold or through cryptocurrencies and offshore accounts (Berentsen and Schaer, 2016).
Additionally, cash is the only barrier to the elimination of the zero-lower bound of nominal interest rates (Buiter, 2016). As soon as people need to pay for keeping their money on a savings account, it will be cheaper for people to withdraw it all and store it elsewhere in cash. This makes it ineffective to have negative interest rates, without a prior ban of cash (BCG, 2019).
Considering that the Netherlands has also limited the locations where you can pay with cash, do you believe the outlook on a cashless society is positive or negative?
Sources:
Berentsen, A. and Schaer, F. (2016). The fallacy of a cashless society. In Beer C., Gnan E., and UW Birchler (Hg.), Cash on Trial, SUERF Conference Proceedings (Vol. 1, pp. 14-19).
Boston Consulting Group (BCG) (2019). How Cashless Payments Help Economies Grow. [online] Available at: https://www.bcg.com/en-nl/publications/2019/cashless-payments-help-economies-grow.aspx [Accessed 18 Oct. 2019].
Buiter, W. (2019). Toward the brave new world of negative rates and a cashless society. [online] Available at: http://asia.nikkei.com/ Viewpoints-archive/Viewpoints/Willem-Buiter-Toward-the-brave-new-world-of-negative-rates-and-a-cashless-society [Accessed 15 Oct. 2019].
Cia.gov. (2019). Europe: Sweden — The World Factbook – Central Intelligence Agency. [online] Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/sw.html [Accessed 17 Oct. 2019].
dictionary.com. (2019). Definition of cashless society | Dictionary.com. [online] Available at: https://www.dictionary.com/browse/cashless-society [Accessed 16 Oct. 2019].
sweden.se. (2019). Sweden – the first cashless society?. [online] Available at: https://sweden.se/business/cashless-society/ [Accessed 16 Oct. 2019].
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morningadvertiser.co.uk. (2019). Is it time pubs ditched cash?. [online] Available at: https://www.morningadvertiser.co.uk/Article/2018/10/08/Spotlight-is-cash-still-king [Accessed 18 Oct. 2019].
