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How to… create a cashless economy

The signs are that the era of physical money will soon come to an end as cash payments decline around the world.

In Europe, around one in five people say they rarely carry money and card transactions look likely to overtake cash in the UK for the first time this year. Debit and credit card use has reached record levels in Belgium, Denmark and Norway, while in many Asian countries, mobile payments are now routine.

The benefits of a cashless approach are plentiful. Digital payments can be made in seconds and secured in various ways, such as via PINs, passwords, biometrics and encryption. In addition, such types of payments offer real-time visibility into how much money is available to businesses or individuals.

The greater transparency of digital transactions is another bonus, with the ability to create a virtual record of where money has moved from and to, and payments linked directly to customers and suppliers. Such payments also have the benefit of cutting across international borders, something that cash simply cannot compete with.

For consumer-facing sectors such as retail and hospitality, going cashless means less time is spent processing payments, maintaining a cash float or cashing out at the end of the day. As a result, staff can devote more of their time and energy on adding value to the business.

Sweden is one of best examples of a country that is quickly shifting to a cashless economy. According to Capgemini and ABN Amro’s annual World Payments Report, Sweden overtook the US in terms of the amount of cashless payments made in 2016 – not bad for a country of just 10 million.

Swedes averaged 461.5 digital transactions per person in 2016, a 13 per cent year-on-year increase, and the report suggests Sweden will maintain its high growth rate and remain the world’s ‘most cashless society’. South Korea, Finland and Australia rounded out the top five countries for cashless payments.

Notes and coins represent just one per cent of the Swedish economy, compared to 10 per cent in Europe as a whole, and a fifth of Swedes claim not to use ATMs any more. Up to 95 per cent of purchases made by 18-24-year-olds in Sweden are with debit or the Swish payment app, while more than 4,000 Swedes even have microchips implanted in their hands, allowing them to pay for rail travel and food, or enter keyless offices, with a wave. It’s hardly surprising that half of Sweden’s retailers predict they will stop accepting cash before 2025.

So what factors have driven the Sweden’s shift to an economy where physical cash could be a thing of the past in a matter of a few years?

In the World Payments Report, Pascal Olin, payment and e-commerce expert at Capgemini, puts Sweden’s progress down to a tech-savvy population, which has quickly embraced a cultural shift away from cash, combined with the fact that consumers can now buy most goods and services – at restaurants, buses, car parks and even pay toilets – using a card or smartphone.

Efforts by various organisations to promote digital payments in Sweden have also helped.

The payment app Swish used by more than six million Swedes was created by a group of Nordic banks. This isn’t the first example of bank cooperation creating new services in Sweden, according to Capgemini’s Olin, who cited secure payments service Bankgirot and online identification service BankID as other examples. “Very few other countries have these kinds of common solutions,” Olin noted.

Sweden’s large banks are also supporting the shift to a cashless way of doing things, with SEB handling cash in only seven of its 118 branches throughout the country. The same bank has also said it will focus on providing digital tools in branches to encourage customers to complete banking transactions themselves.

In addition, retailers are experimenting with cashless payments. Ikea in Gävle, for example, temporarily went cashless after realising fewer than one per cent of shoppers used cash, while Ikea employees spent about 15 per cent of their time handling, counting and storing money.

Going cashless freed up these staff members to work on the sales floor, and for the 1.2 of every 1,000 customers that had only cash, mainly in the cafeteria, the store offered them free items.

Of course different rules may apply to different countries, but for Sweden – with a population willing to embrace cashless payment, a supportive government and banks, and retailers that are prepared experiment – it means the country is fast becoming a byword for a cashless economy.

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How to… create a cashless economy
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