Is Sweden Proof There Is Such A Thing As Too Much Digital Payment Success?

Usually when we’re telling a story at PYMNTS about expectations for a product being radically divergent from its actual performance, it is a story about underperformance. Something comes in on a cloud of extravagant hype only to end up with merely so-so reaction from the intended audience. In more serious misalignments, something briefly billed as the next big thing in payments and commerce will fizzle out shortly thereafter, mostly unnoticed.

Every once in a while, however, a product or offering turns out to be more successful than anyone expected — and Sweden’s experiment with going cashless falls into the latter category.

But is the incredibly rapid rise of cashless in Sweden a good thing?

The Rapid Rise of Digital Payment Domination

To say that digital payment methods rule in Sweden today isn’t an overstatement. According to a national study released earlier this year, as of 2018 only 13 percent of Swedes reported using cash in a recent transaction. The remaining 67 percent of transactions were digital.

Those digital transactions, according to the study, fall into two major areas: card-based payments and mobile payments. Card payments still dominate, and debit cards are the dominant form factor by a very considerable margin. Around 80 percent of survey respondents said they used a debit card for at least one recent purchase.

But mobile payments have been the runaway growth story, embodied in Sweden’s national mobile payments platform Swish. Swish started out as a P2P payments platform that allowed consumers to send funds amongst themselves, much like Zelle or Venmo. But Swish has become a go-to mechanism not just for people who want to pay each other, but for people who want to pay just about anyplace. As such, the report noted, its usage has exploded in the last five years.

“The use of Swish has increased very rapidly in recent years. In 2014, around 10 percent of the respondents had used Swish during the past month and in 2018, around 60 percent have used Swish,” the report noted.

And as Swish has grown, the report found, the use of cash has accordingly declined — and sharply.

Swedes have been lighter cash users than Americans for quite some time. As of 2010 only around 40 percent of Swedes reported having used cash recently — whereas over 70 percent of  Americans reported recent cash use as of 2018, according to the PYMNTS Global Cash Index. And that greater inclination toward digital payment has been nurtured over the last decade by the increasing number of merchants large and small that are saying no to cash payments, in favor of cards or Swish. From mom and pop shops and cafes to major chains like IKEA to public transportation, bills and change often aren’t accepted.

And aren’t much missed.

“It’s good for both the guests and for us,” Christopher Loob told NPR. Loob is the general manager of Urban Deli, a restaurant and ecological food company in Stockholm that stopped accepting cash a year ago.

“It’s saved us a lot of time in that we don’t have to count cash anymore. There’s hardly been any reaction. Almost everybody has the alternative payment method — a credit card.”

So consumers are happy, merchants are happy, the plan to go cashless is well in hand. Nothing more to see here?

Not quite.

There are a lot of concerns that going cashless is going a little too well — and leaving a few too many loose ends in its wake.

The Problems Great and Small With Too Much Cashless Success

There are a variety of concerns with Sweden’s rapid evolution away from hard currency, some admittedly more serious than others.

Among the less passionate complaints among consumers is the fact that cash has been a little hard to come by on the off chance it is actually needed.

“On the rare occasions, perhaps once or twice a month, when I want 200 kronor, it can be hard to get hold of. The ATM nearest my house recently shut down: Bankomat, the cash machine company co-owned by the banks, has reduced the number of outlets by a fifth in four years,” once consumer noted.

And if you are thinking Swedes can just go to a bank branch instead of an ATM — not so much.  According to reports the majority of local bank branches have stopped letting people take out cash or even bring cash into the bank.

There are others, however, who think something far more serious and sinister is going on with cashless than merely inconvenience. Kontantupproret (Cash Rebellion) has been passionately advocating against cashless Sweden for the last six years, under the leadership of colorful character and former police chief named Björn Eriksson. The group’s argument? Cashless is a conspiracy of Sweden’s banks to infringe upon democracy, privacy and individual freedom. The accusations are serious, and group members are quite serious about them, though they are not taken terribly seriously by outsiders.

There are, however, more serious concerns about the rapid march of cashlessness in Sweden that are starting to gain traction.

Christina Tallberg, president of the Swedish National Pensioners’ Organization, said cashless arrangements often put the most burden on society’s most vulnerable members — retirees, people with disabilities and newly arrived refugees — who often  struggle with digital transactions.

“This is both a personal problem, but it’s also a problem for the civic society,” Tallberg told NPR. “As long as it’s legal to pay with notes and coins, it must be up to the individual to choose how you will do your payments.”

There is also a concern that a society totally dependent on electronic payments might be setting itself up for a seriously dangerous situation. And that concern is most clearly articulated by Sweden’s central bank, Riksbank, which has otherwise been an avid booster of the cashless migration.

Digital payments are wonderful, Bjorn Segendorf, an adviser in Riksbank’s payments department told PYMNTS — so long as the power is on. If something ever caused a sustained power loss in Sweden, consumers’ inability to access good old-fashioned analog cash could snowball into a lot of bigger problems.

“We would like to see the banks continuing supplying their customers with cash services,” said Segendorf. “Even if consumers aren’t choosing cash — it is really vital in the event of emergency that consumers have cash reserves in their homes and easy paths to access it.”

Moreover, Segendorf noted the lesson to be learned from Sweden is that cashless, while a good and intelligent thing to get behind, is something that must be approached circumspectly and cautiously.

“Digital technology is a wonderful powerful tool — and we have seen its best effects here. But the reality is success has consequences, and we needed to have realized that much earlier than we did,” Segendorf said. “It doesn’t mean we have to turn back the clock on cashless, but we do have to really think about the proper pace going forward.”