A cashless society
In Sweden, technology is close to making cash a thing of the past. All aboard with the cashless society?
Sweden has been at the forefront of banking innovation for a long time. The country's first automatic cash machine was inaugurated in July 1967, only a week after the world’s very first one was opened in London. And the development and simplification of payments has evolved greatly ever since. Now, Sweden is leading the way towards the cashless society.
Mobile payments and Swish
You can tell that something has become part of the culture when it enters the day-to-day language. The verb swisha (to swish) is the perfect example. It refers to using Swish, an app for instant payments. A smartphone with a number is all you need to make a transfer in a matter of seconds.
Many cafés, shops and supermarkets in Sweden have started to display QR codes that customers can scan to pay directly by using their phones. The Swish app, together with many other large and smaller scale innovations, contribute to Sweden’s reputation as an evermore cashless society.
Another growing trend among Swedes is to use a digital wallet or credit card for payments via a smartphone instead of physical money/cards.
Mobile bank ID
Today, a big part of integrating into Swedish society involves using BankID. It’s a mobile app that allows anyone with a Swedish personal identification number (personnummer) and bank account to access all digital public services, use online banking and even sign contracts.
The simplicity of using one six-digit code – nowadays you can also go via fingerprint or face identification – to access digital services via Bank-ID saves people from having to remember a large number of codes and passwords.
Living a cashless life
Cashless payments very much go hand in hand with the Swedish lifestyle.
Swish’s popularity can partly be attributed to Swedes’ fondness for splitting the bill in bars and restaurants. Often, one person pays and the rest swish their share.
According to Ella Johansson, professor in Ethnology at Uppsala University, this has much to do with the relation between friendships and resources:
‘Swedes see exchange of money and debt as a threat to friendship. In other cultures, like Italy for example, people would fight over being the one to pay the bill for the sake of keeping up the friendly relations.’
Fintech helps drive the cashless transformation
The move towards a cashless society is also driven by fintech, or financial technology. Many internationally renowned fintech companies were founded in Sweden. One example is Klarna, a payment system startup founded in 2005 that claims to have around 150 million customers globally.
Another is Zettle (previously iZettle), which makes small cheap card payment terminals. The terminal allows a retailer to take payments by connecting it to a dedicated app on a smartphone or tablet.
A third example is Trustly, a company that develops cardless payment solutions. Its platform offers digital account-to-account payments, which means that people can pay their online shopping straight from their bank account.
Handy payments, literally
To some people, the cashless experience is more than skin-deep. They’ve got a microchip implanted in their hand, which can store different kinds of data – from ID to door-opening blips, train tickets and even bank cards. This makes it possible to pay by simply waving the hand.
Though this might sound like science fiction, but to date more than 4,000 Swedes have inserted this handy biohacking commodity into their lifestyle. It saves them from carrying bank cards, ID, membership cards and keys around.
More and more Swedes are going cashless
From 2010 to 2020 the proportion of Swedes using cash fell from 39 to 9 per cent, according to the most recent statistics from Sweden’s central bank, the Riksbank.
The use of cash in Sweden is mostly limited to making small payments and by the elderly. In shops and cafés, it is much more common to find the sign ‘Card only’ or ‘Cashfree’ than ‘Cash only’ as in many other countries.
Online shopping is also very popular, with many Swedish retailers gaining a good share of their margins via web shops. According to Eurostat, 87 per cent of the Swedish population made purchases online in 2021, putting the country among the top in Europe.
To meet the changing needs of an increasingly cashless society, the Riksbank is piloting a digital currency – the E-krona – a so-called central bank digital currency, or CBDC. One aim of this pilot project is to protect the Swedish krona against the rise of decentralised cryptocurrencies.
Risks and challenges
Not everyone is enthusiastic about the cashless society, though.
There’s Stefan, a 73-year-old man who says that he still likes to make cash payments: ‘Especially when I go to Systembolaget [the state monopoly shop that sells alcohol]. I never pay by card there, because I don’t want the bank to know how much I spend on wine.’
Young Italian lawyer Silvia has lived in Sweden for two years and she thinks that electronic payments are a really good way to prevent money laundering, corruption and other criminal activities. But when it comes to implanting microchips, she expresses concern: ‘I would never have one implanted! Think of all the personal data produced, what would happen if it fell in the wrong hands?!’
A more common problem is the increasing divide between tech-savvy young people who adapt to changing payment methods easily and the elderly, many of whom still prefer using cash. Just look at bus tickets; people are often expected to buy tickets via an app connected to Swish or a bank card. This makes it very handy for those accustomed to using smartphones, but for those who have an old-school phone or no phone at all, this is a real barrier.
What next for cashless Sweden?
The future of banking looks very high-tech and focused on artificial intelligence, AI. Apart fom the above-mentioned, fintech companies like Tink and Rocker (previously Bynk) are also booming, and more startups are on the horizon. Banking apps and Swish are also continuously evolving, with upgrades such as simplified and integrated services transitioning towards a cashless society.
Who knows. ؘMaybe one day everyone will be making payments with their implanted microchips? Whatever the future of banking has in store, Sweden is likely to remain at the forefront of future payment innovations.