Sweden is rapidly turning into a cashless society, which seems like the utopian dream of many a government figure.
What could possibly go wrong from the government’s point of view? Isn’t it ideal that they could soon digitally control every single person in the country?
Actually, quite a few things are going wrong. So much so that even members of the government are expressing concern.
Sweden is the most cashless society in the world
The change is happening fast in the European country.
“No cash accepted” signs are becoming an increasingly common sight in shops and eateries across Sweden as payments go digital and mobile…
…Sweden is widely regarded as the most cashless society on the planet. Most of the country’s bank branches have stopped handling cash; many shops, museums and restaurants now only accept plastic or mobile payments…
…Last year, the amount of cash in circulation in Sweden dropped to the lowest level since 1990 and is more than 40 per cent below its 2007 peak. The declines in 2016 and 2017 were the biggest on record…
…An annual survey by Insight Intelligence released last month found that only 25 per cent of Swedes paid in cash at least once a week in 2017, down from 63 per cent just four years ago. A full 36 per cent never use cash, or just pay with it once or twice a year. (source)
Cash is used so infrequently that the government of the country has demonstrated concern. And this isn’t just in the big cities. A source in rural Sweden tells me that even in his remote area, the push to go cashless is omnipresent.
What could possibly go wrong?
The folks of Sweden have so little use for cash that it’s predicted many stores will no longer even accept it by 2025. And according to an article in the Financial Post, the government is beginning to have second thoughts.
…The government is recalculating the societal costs of a cash-free future.
The financial authorities, who once embraced the trend, are asking banks to keep peddling notes and coins until the government can figure out what going cash-free means for young and old consumers. The central bank, which predicts cash may fade from Sweden, is testing a digital currency — an e-krona — to keep firm control of the money supply. Lawmakers are exploring the fate of online payments and bank accounts if an electrical grid fails or servers are thwarted by power failures, hackers or even war. (source)
And the potential of a down-grid situation isn’t the only problem. Older Swedes and immigrants who aren’t really involved in the digital society could have great difficulty making transactions.
Consumer groups say the shift leaves many retirees — a third of all Swedes are 55 or older — as well as some immigrants and people with disabilities at a disadvantage. They cannot easily gain access to electronic means for some goods and transactions, and rely on banks and their customer service. (source)
We all know some folks who eschew online banking and never use a debit card. Many of these people are senior citizens who aren’t ready to learn a new technology. As well, there’s a cost involved in taking part in a technological economy: smartphones, internet service, and computers are simply not a part of the lifestyle of many folks.
One group, the Swedish National Pensioners Organization, is attacking this issue by teaching classes to get them more comfortable with digital transactions.
“We have around 1 million people who aren’t comfortable using the computer, iPads or iPhones for banking,” said Christina Tallberg, 75, the group’s national president. “We aren’t against the digital movement, but we think it’s going a bit too fast.”
The organization has been raising money to teach retirees how to pay electronically, but, paradoxically, that good effort has been tripped up by an abundance of cash. When collections for training are taken in rural areas — and the seniors donate in cash — the pensioner in charge must drive miles to find a bank that will actually take the money, Tallberg said. About half of Sweden’s 1,400 bank branches no longer accept cash deposits.
“It’s more or less impossible, because the banks refuse to take cash,” she said. (source)
Just to emphasize…”the banks refuse to take cash.” THE BANKS.
The reason given for the refusal to accept cash is that they wish to prevent recurrences of the violent robberies that took place in the early 2000s.
And of course, there’s concern of government control.
It seems rather ironic that it’s the government pointing out the possibility of trouble with government control in a cashless society, especially since they’re considering rolling out a new digital currency called the e-krona.
The central bank has plans to roll out a pilot version next year of a new type of Riksbank money — the digital krona, or e-krona — that could replace physical cash or at least help calm the current cash conundrum. An e-krona would mean that the functions of a currency backed by the state would remain, even in an all-digital world that is fast approaching.
Christine Lagarde, managing director of the International Monetary Fund, noted last week that several central banks were “seriously considering” digital currencies. (source)
If the government were in charge of the digital currency, the amount of control they’d have would be breathtaking. Could they simply make your digital currency invalid if you owed taxes or were suspected of a crime? Could they wipe out everyone’s online accounts in the event of some kind of bank holiday or economic collapse?
If the grid went down in a long-term way, all you’d saved would be lost forever. A short power outage would cripple communities. Every single purchase you make would leave a digital footprint, and huge amounts of personal data could be mined from it. And what about the possibility of online bank robberies carried out by hackers?
The list of things that could go wrong is infinite.
And of course, it all goes back to microchips.
Out of all the nations in the Western world, it seems that Sweden is the most enthusiastic about the embedding of microchips into humans “for convenience” purposes.
The microchip “bypasses the need for cash, tickets, access cards, and even social media,” according to the Daily Mail…
…In June, 2017, SJ Rail, the Swedish train operator, announced that 100 people were using microchips for train rides, obviously indicating that the rail system was already set up to handle the payment system before anyone was ever microchipped.
For this system, passengers with a microchip in their hand have their ticket loaded directly onto the device and the train conductor can read the chip with a smartphone to confirm payment.
The Daily Mail paints the chip in a positive light, recounting the opinion of Szilvia Varszegi, 28, who said the chip “basically solves my problems.” The “problems” Ms. Varszegi is referring to is apparently the “problem” of manually purchasing a ticket or engaging in a phone-based transaction. (source)
Well, thank goodness poor Ms. Varszegi’s horrible burden has been lightened.
Many readers expressed dismay, shock, and revulsion at the very idea of having a chip implanted in their bodies, and I’m with you. But we’re witnessing something important here. We’re watching an alarming glimpse at the future.
The endgame of complete control truly seems to be in sight as more and more Swedes go cashless.
In a cashless society, ‘the chip will replace YOU!’ – Lionel RT America
Published on Nov 27, 2018
Thousands of Swedes have been microchipped to allow them to conveniently pay for goods and services without cash, credit card or smartphone. Now, Swedish companies are asking their employees to accept such implants to aid in identification and security clearance. Lionel of Lionel Media sees the ominous trend as “the mark of the beast” and yet more evidence that “we’ve lost all sense of freedom.”
The measure, which can now go before the full state Senate, would require all brick-and-mortar retailers to accept cash, excluding transactions made online, by telephone, or by mail. That would make New Jersey the second state to prohibit retailers from refusing to accept cash and the first since 1978, when Massachusetts passed a law banning cashless stores.
The state Senate Commerce Committee unanimously approved the bill 5 to 0, with amendments that would exclude retailers inside airports and certain parking facilities from the cash requirement. Specifically, the amended bill carves out municipally-owned parking facilities, parking facilities that only accept mobile payments, and airports as long as a terminal has at least two food retailers that take cash.
The state Assembly passed a version of the bill in June by a 71 to 4 vote.
Torres regards cash bans as both classist and racist:
Why do you think cashless business models “gentrify the marketplace”?
On the surface, cashlessness seems benign, but when you reflect on it, the insidious racism that underlies a cashless business model becomes clear. In some ways, making a card a requirement for consumption is analogous to making identification a requirement for voting. The effect is the same: It disempowers communities of color.
These are public accommodations. The Civil Rights Act established a framework for prohibiting discrimination in matters of housing, employment, and public accommodations. If you’re intent on a cashless business model, it will have the effect of excluding lower-income communities of color from what should be an open and free market.
And we’ll start to attach a certain stigma to people who pay for things with cash?
Exactly, in the same way that one might stigmatize [Electronic Benefit Transfer (EBT)] cards. When I was growing up, I remember the embarrassment that surrounded the use of food stamps. We live in a society where it’s not enough to stigmatize poverty; we are also going to stigmatize the means with which poor people pay for goods and services.
More Consumers Abandon Cash
Despite these pushback measures, last week the Pew Research Center reported in More Americans are making no weekly purchases with cash that roughly 29% of US adults say they make no purchases using cash during a typical week – up from 25% in 2015. At the same time, the share of those who claim to make all or almost all of their weekly purchases with cash has dropped from 25% in 2015 to 18% today.
As Figure 2 makes clear, declining use of cash correlates heavily with income. So, adults with an annual household income of $75,000 or more are more than twice as likely as those earning less than $30,000 a year to eschew cash purchases in a typical week (41% compared to 18%). Whereas more than four times as many lower-income Americans report they make all or almost all of their purchases using cash, compared to higher income Americans (29% vs. 7%).
Pew reports that both race and cash use also correlate, with 34% of blacks using cash for all or almost all of their purchases, about twice that of the 15% of whites and 17% of Hispanics who rely on cash. Similarly, age is also important, with 34% of adults under the age of 50 making no cash purchases in a typical week, compared with 23% of those ages 50 or older.
According to FDIC estimates, 6.5 percent of American households were unbanked in 2017, meaning they did not have an account with an insured financial institution. Another 18.7 percent of households in the United States have a checking or savings account but still relied on financial services outside of a traditional bank — such as payday loans or check-cashing businesses — the estimate showed.
Over to Grub Street and Torres again for a trenchant summary of the main issue:
What do you make of the claim, “But these days everyone has a card!”
People who say that are living in a bubble of privilege — they look around and all their friends have cards. In response I say, “Does it occur to you that your world is pretty unrepresentative?” There are hundreds and thousands of New Yorkers who may have no permanent address or home, and many New Yorkers who are underbanked, either because of poverty or because they lack documentation. Requiring a card is erecting a barrier for low-income New Yorkers — period — and it’s coming from the very communities that claim to be progressive, as if, “Well, I am all for racial justice just so long as it doesn’t come at the expense of my own privilege.”
I think that many of these places actively want to keep a certain type of person out.
Of course! Earlier I said that no matter what the intention was, its effect is discriminatory, but I do think that it can also be intentional where the idea is to filter out the deplorables.
Even advocates of cashless transactions concede critics have a point – but reject the stark conclusion that the purpose of cashless policies is to exclude certain types of customers. According to the WaPo:
As CNBC has noted, business leaders such as Shake Shack founder Daniel Meyer have defended cashless policies by pointing to higher security and improved customer service and efficiency, even as they acknowledge their critics. “We know that some have raised concerns about the socioeconomic implications of operating a cashless business” Meyer wrote in a blog post earlier this year. “That’s certainly not our aim.”
The Bottom Line
Some cities and states are actively pushing back against the trend toward cashless businesses. Pending or mulled measures that maintain a place for cash would ensure that public accommodations remain accessible to all – and not restricted only to those privileged to have access to a credit or debit card, or a mobile app.
One option to break through the zero lower bound would be to phase out cash. But that is not straightforward. Cash continues to play a significant role in payments in many countries. To get around this problem, in a recent IMF staff study and previous research, we examine a proposal for central banks to make cash as costly as bank deposits with negative interest rates, thereby making deeply negative interest rates feasible while preserving the role of cash.
The proposal is for a central bank to divide the monetary base into two separate local currencies—cash and electronic money (e-money). E-money would be issued only electronically and would pay the policy rate of interest, and cash would have an exchange rate—the conversion rate—against e-money. This conversion rate is key to the proposal. When setting a negative interest rate on e-money, the central bank would let the conversion rate of cash in terms of e-money depreciate at the same rate as the negative interest rate on e-money. The value of cash would thereby fall in terms of e-money.
To illustrate, suppose your bank announced a negative 3 percent interest rate on your bank deposit of 100 dollars today. Suppose also that the central bank announced that cash-dollars would now become a separate currency that would depreciate against e-dollars by 3 percent per year. The conversion rate of cash-dollars into e-dollars would hence change from 1 to 0.97 over the year. After a year, there would be 97 e-dollars left in your bank account. If you instead took out 100 cash-dollars today and kept it safe at home for a year, exchanging it into e-money after that year would also yield 97 e-dollars.
At the same time, shops would start advertising prices in e-money and cash separately, just as shops in some small open economies already advertise prices both in domestic and in bordering foreign currencies. Cash would thereby be losing value both in terms of goods and in terms of e-money, and there would be no benefit to holding cash relative to bank deposits.
This dual local currency system would allow the central bank to implement as negative an interest rate as necessary for countering a recession, without triggering any large-scale substitutions into cash.
Pros and cons
While a dual currency system challenges our preconceptions about money, countries could implement the idea with relatively small changes to central bank operating frameworks. In comparison to alternative proposals, it would have the advantage of completely freeing monetary policy from the zero lower bound. Its introduction would reconfirm the central bank’s commitment to the inflation target, rather than raise doubts about it.
Still, implementing such a system is not without challenges. It would require important modifications of the financial and legal system. In particular, fundamental questions pertaining to monetary law would have to be addressed and consistency with the IMF’s legal framework would need to be ensured. Also, it would require an enormous communication effort.
The pros and cons of the system are country specific and should be carefully compared to other proposals, such as higher inflation targets, for increasing monetary policy space in a low-interest environment. We consider these issues, and more, in our research.
Yves here. I hope Clive and other non-US payment systems experts will pipe up, but banks in the US have hoist themselves on their own petard with respect to trying to get rid of cash. The article notes that these efforts are discriminatory, in that lower income people are often un or under-banked. But a second issue is that the US has old payment systems infrastructure because banks and other players chose to milk what they had, and they has resisted offering products to serve the unbanked at low cost. For example, in South Africa in 1997, employers would pay low-wage workers on a chip-based stored value card. It’s a disgrace that banks have yet to offer a non-gouging version of that sort of product for lower-income households here.
By Fred Dunkley, a tech analyst, writer, and seasoned investor with years of experience covering global markets and geopolitics. Originally published at SafeHaven
Cash is cumbersome, dirty and increasingly too tangible for our digital desires. And while we’ve already given it up to a fair extent for the credit and debit card–it still means we have to wait in lines, and that’s so 1990s. In an effort to cut costs and avoid long lines in front of the cash register, a small-but-growing number of retailers have stopped accepting paper currency entirely. Over the past couple of years, some retail stores and restaurants in large cities have simply ceased cash operations.
But the problem is that while it may be safer and more convenient to pay without cash, banning the use of cash could be discriminating against low-income individuals without credit or bank accounts because of the fees and minimum balance requirements.
In fact, local and state governments are rather up in arms about the whole thing.
Earlier this month, the Philadelphia City Council passed a bill making it the first major city to ban cashless payments. New Jersey. Now New York City, Washington, San Francisco and Chicago are now all weighing similar bills.
“With a 26-percent poverty rate in Philadelphia, the mayor believes in equal opportunity for all,” city spokesman Mike Dunn said in an emailed statement to USA Today.
“It is important to recognize the fact that not everyone has access to banks or lines of credit,” the New York Times cited State Senator Nellie Pou, one of the sponsors of the bill in New Jersey, as saying.
Going cashless is inevitable, but much of the country isn’t ready for that just yet.
This was mostly expressed in Philadelphia where more than one-quarter (some 400,000 people) live below the poverty line, according to a Pew Charitable Trusts report from last year. With $19,700 a year for an adult with two children at home these families lack access to credit cards.
For New Yorkers who don’t want to wait in line anymore, it’s important to consider that despite some of our penchants for going fully digital, we are still largely a cash society.
A Federal Deposit Insurance Corporation report from 2017 shows that 6.5 percent of the U.S. households were “unbanked”; in other words, households in which no individual has a checking or savings account. Another 18.7 percent of households were categorized as “underbanked”.
And while those rates are declining all the time, they are still some large hurdles to a cashless society.
It’s also worth noting that cash was the most frequently used payment instrument in 2017, accounting for 30 percent of all payments. Credit and debit cards were used in 48 percent of consumer transactions in 2017, of which 27 percent went to debit and 21 percent to credit card payments, according to the Federal Reserve report from the fall.
Still, financial institutions are using every weapon in their arsenal to fight against cash because their customers are the ones who want to go cashless.
Visa has been offering $10,000 each to as many as 50 restaurants and food vendors to pay for their technology and marketing costs in return for a pledge to go cashless.
And e-commerce giant Amazon, for its part, came out in opposition to the New Jersey bill to ban cashless retail outlets. After all, it has five cashless and cashier-less pop-up stores and one bookstore there.
Now it’s lobbying local governments who are considering their own ban on the Amazon automated stores.
There are only a small number of Amazon Go stores in operation today, but the company was planning to open as many as 3,000 locations by 2021, according to Bloomberg. Now it might have jumped the gun as local and state governments worry about discrimination and poverty.
This week, Sainsbury’s opened what it billed as the UK’s first till-free grocery store. This doesn’t just claim to be cashless, but cardless. After downloading a bright orange app on their smartphones, shoppers scan their own groceries as they walk around, then touch to activate Google or Apple Pay — and simply walk out.
Okay, before getting to some of the problems that may afflict those who choose to use this latest innovation let me address a threshold issue.
What about those who don’t want to download a store’s app to make a couple of purchases?
Ditto those 8 million Britons who the FT notes would struggle in a cashless society – and who tend to skew older, and poorer.
Does Sainsbury’s still want their pounds and pence?
The answer, for the moment is yes – even at this flagship store. The FT relates how after a customer failed to satisfy the conditions necessary to go cashless – being a member of the Sainsbury’s loyalty program and downloading the app – a customer asked whether she could still get groceries at this store:
She was reassured that she could still pay the conventional way — the second member of staff stood behind a low-key counter in the corner where it is still possible to pay by cash or card. There was a queue of five people. Seeing this, another woman who was trying to buy a muffin and a banana put her shopping back and walked out. This is clearly not the bright orange future that Sainsbury’s envisaged.
Which makes me wonder: what is the point?
Of course, I know what the point is. It’s to convince people there is no alternative and to embrace the brave digital future. Which in turn would allow Sainsbury’s to replace paid staff with unpaid customer effort, as well as do deep and thorough data mining of anyone who chooses to use this “service”.
Flaws for Those Willing to Take a Flutter
Let me now turn to a couple of problems with this system for those who either choose to embrace this brave new digital world – or cannot be bothered to resist it.
First, we all know how well these automated systems work in reality. The digital scales that do not register. The conventional self check-out till that doesn’t work – even leaving aside the app issue.
These systems are far from foolproof – and they do fail. In the face of a failure in a self-scan checkout, coupled with insufficient sales staff to assist, does the customer just think to him/herself “screw them” and make off with his/her (nickel and dime) illicit booty?
A couple of Tuesdays ago, after a difficult day at work, a thing that happens to me more often than I’d usually care to admit happened once again. At a supermarket self-checkout machine a frozen pizza I tried to swipe wouldn’t register, leaving me irked and full of spite. As a kind of reproach, I prepared to bag the item in any case, but a pang of weary guilt set in. Two choices sprung to mind. Carry on as though nothing untoward had happened, and knowingly steal. Or hail the cashier, who at the time was busy at another till, to fix the machine and right the wrong.
I picked the second option, eventually. Though, to be honest, on another day I might have swayed the other way. Plenty of us do. Need proof? Look online, perhaps at a Reddit thread, and you’ll find anecdotes of petty self-checkout theft delivered with something like a stick-it-to-the-man pride. Expensive grapes are scanned as inexpensive carrots. Prime steaks are swiped as potatoes. The barcodes of pricey objects – wine, beer, spirits, cosmetics – are deliberately obscured by stickers removed from significantly cheaper on-sale items. Some scams have names – “the banana trick” (steaks as potatoes), “the switcheroo” (cheap barcodes for pricey ones), “sweethearting” (when a checkout supervisor only pretends to scan an object before handing it to a loved one, gratis) – though there are so many techniques not all of them do.
The Guardian devoted some attention to the personal morality angle. For those of you so interested, look at that piece. What I’m more interested in is that one rationale for moving to digital systems is supposed to be to deter shoplifting, and reduce human staffing levels.
What the Guardian reports may actually be occurring is that shoplifting might be increasing – at least for those who use these systems:
But any financial gains now appear to be marginal, at least in part due to unforeseen spikes in self-scanning theft. In a recent study a team at Voucher Codes Pro, a sales coupon website, quizzed 2,532 shoppers about their supermarket habits and found that close to a quarter had committed theft at a self-checkout machine at least once. (A figure from the same report suggested that the total cost of items stolen through self-checkout machines in 2017 came in at more than £3bn, up from £1.6bn in 2014, though the numbers are speculative.) Some steal by accident, the study found, perhaps on account of a scanning error – honest mistakes. But many perpetrators know exactly what they’re doing.
Unsurprisingly, retailers are loathe to divulging how much theft may be increasing. Nonetheless:
The subject is fraught with uncertainty. Often it is difficult for retailers to discern between malicious actions and honest mistakes – was the customer absent-minded or consciously fraudulent? – and proving intent can be perilous. Charge an honest shopper with theft and lose their business. Let a perpetrator off the hook and suffer a reduction in profit. [Adrian Beck, emeritus professor of criminology, University of Leicester] describes the scenario as “a legal and customer relations minefield”.
And a second issue. What happens when you get home and realize you thought you bought 100 grams of British back bacon but that the AI has charged you for half a kilo of jambon iberico? What do you do then?
Now, you might contact the store and ask them to correct your billing. But if you’re already home, this dispute will boil down to your word against the algorithm’s. Given how little staff time is going to be available to examine discrepancies – and, how difficult it would be even for technical staff to get to the bottom of the issue, possibly requiring review of CCTV footage – there’s going to be a lot of unverifiable claim and counter-claim.
In these situations, most customers will, if they don’t get matters resolved to their satisfaction — e.g., get your money back – will inevitably fall back on getting a chargeback from their card issuer. Here, for once, the system is on the side of the consumer. Credit cards especially have cast-iron chargeback provisions and even debit cards are broadly amenable to making the merchant prove their billing is correct.
All merchants can do is represent that their algorithms are X% reliable. But even if they’re 99% foolproof, that’s not good enough to sustain a chargeback reversal. And given the amount of time it takes to look into each individual claim in a way which will satisfy the card networks high bar of “compelling evidence” before they’ll uphold the merchants’ versions of events (and subsequent billing accuracy) against what will, typically, be de minimis discrepancies, the default response of merchants is likely to be to simply accept the customer’s claim on unchallenged evidence – at least initially.
If these errors skew randomly, I would imagine more customers might report the discrepancy if the mistake hurts them – and stay silent if it’s in their favor. Of course, if it becomes known that Sainsbury’s accepts customer claims without much fanfare, that opens the way to further gaming of the system.
How long, then, will this whole move to a brave till-free world prove to be sustainable before the increased operational losses invalidate the whole business case?
Back to the FT for the last word:
Jonathan Eley, the FT’s retail correspondent, reckons the journey to a cashless society is being partly driven by the desire of big business to collect data about each and every payment we make. “Cash undermines the espionage effort,” he says.
Australia's Liberal Party government has announced that it will soon be illegal to purchase anything over $10,000 with cash. The government says it's "encouraging the transition to a digital society" and cracking down on tax evasion. But not everyone is happy with the move.
The ban starts on 1 July 2019 and any payment over $10,000 will have to be made by check or credit/debit card. The government will enforce the measure by allocating roughly $300 million for what it calls the Black Economy Standing Taskforce. ...
Australians have a strange relationship with cash - strange in the sense that they still use it. Roughly 37 per cent of all commercial transactions in Australia are made using cash. That number is just 32 per cent in the US and 15 per cent in Sweden. Many Swedes are angry about its slow move to a cashless society, arguing that going completely digital causes security concerns. And India began phasing out a whopping 86 per cent of its currency in November of 2016 by invalidating ₹500 and ₹1000 notes as legal tender.
Today it's any sum over $10,000 in Australia, but anyone with their eyes open can see where this is going. ...
San Francisco officials voted Tuesday to require brick-and-mortar retailers to take cash as payment, joining Philadelphia and New Jersey in banning a growing paperless practice that critics say discriminates against low-income people who may not have access to credit cards.