The Strategist

“Cash-free banks” in a cashless society are no joke


04/05/2016 - 15:41



In Stockholm, you can pay a street hawker with a credit card; in Copenhagen you can buy a single shot espresso with a smartphone; in Helsinki, you can go grocery shopping without a wallet… Yet while this futuristic utopia and cashless society may benefit financial institutions and big businesses, customers won’t be included in that.



Sweden and Denmark to become the first cashless societies in the world
Sweden and Denmark to become the first cashless societies in the world
Scandinavia is slowly becoming the first cashless region in the world. Denmark is even considering taking a step further by allowing retailers to completely ban cash from their stores.

In Sweden, banks are pushing the Government to take action to become the first fully cash-free country. At more than half of the country’s largest bank branches, including SEB, Swedbank, Nordea Bank among others, no cash is kept on hand, nor are cash deposit accepted. The banks are surely saving a significant amount on security, having eliminated physical cash to guard. However, customers now feel the impact of this major change.

In 2010, Swedish banks held around 8.7 billion krona in notes and coins, and today it’s around 3 billion. A Swedish bank consortium controls most of the cash machines in the country and they are now dismantling hundreds of them. Banks may be saving on this as well, but customers in rural areas now have to go further into the city in order to access basic services, and many customers are already stepping out to ask the Government not to give more power to the banks.

A cashless society may seem like a good idea on paper, however if it benefits the banks, which are more protected from physical robberies and thus allowed to cut costs, it doesn’t even so protect customers and banks from virtual fraud and security risks. The most recent figures from the ECB (1) show that fraudulent use of bank cards is racking up billions in costs for unlucky consumers. Total card fraud in Europe hit €1.3 billion ($1.4 billion) in 2012, a near 15 percent jump the year earlier. In other words, customers are increasingly at risk, as they might get hit directly with the consequences of digital fraud.

It’s therefore no wonder that banks are pushing for a cashless society, but it’s a very dangerous bet for all of us. Many other countries already refuse to transition towards a cashless society for several reasons.

For example, Germans place a high value on protecting their identities, privacy and data security. That’s the reason why most of them still refuse to transition to a cash-free society. Most Germans always carry some cash with them. The Deutschmark was a source of pride for their people, and today even if the Euro has replaced it, it has only increased Germans’ use of cash.

For historical reasons, many Germans and Europeans worry about the fact that their digital transactions could be monitored. Some tend to argue that cash-free transactions may be practical, but really they’re mostly favored by banks as a way of cutting costs while boosting profits.

Throughout Europe, most countries stand by the liberty of giving the customer the choice to use whatever means of payment they want. Yet, the Danish Government’s proposals go against this right, giving gas stations, clothing stores and restaurants the option to stop taking cash payment. For many, this would slow down the economy instead of boosting it.

According to the former finance minister, Bjarne Corydon, the fact that Danish companies are still required to accept cash payments “involves considerable administrative and financial burdens.” Yet, the proposal of a cashless country didn’t come from a consumers’ group, nor a business owners’ association, but from the banks themselves. It is merely hard to envision this change as positive for the average customer and business owner.

Danish Chamber of Commerce chief executive Jens Karskov publicly declared that “Cashless environments will make it possible to test new innovative store concepts and payment without having to incorporate the very cost-intensive measures are required when handling cash” (2).

But customers already expressed their concerns and vowed to make the government change its view on the issue, fearing that older age groups would change their consumption habits because they are so used to using cash.

“The plan to eliminate cash payments from retailers and restaurants will no doubt raise concerns over possible restrictions of consumer access to necessary goods such as food and gas, as well as to risks of increased electronic fraud, but Denmark and other Nordic countries have already signaled they intend to lead the shift toward cashless economies, even if they have to push consumers along with them,” wrote Shelly Banjo, journalist in Quartz (3).

There are many reasons why customers are angry at this reform (4) that seems to have been planned without them even knowing about it. Most of them are still attached to banknotes and coins for what it means, historically, it has always been a source of pride and national unity. When holding cash you hold part of your country’s history, and it goes the same when traveling abroad. Look at how e-books were supposed to completely overtake printed versions… It never happened and most likely won’t because even if the book is the same, the feeling isn’t and customers, beyond being used to it, prefer it over electronic.

Not leaving customers the freedom to choose their form of payment represents a great threat to democracy in many countries. The near future will reveal whether Denmark and other Scandinavian countries truly feel that threat and whether they will reconsider supporting an utopian cashless future.
 
  1. European Central Bank
  2. Denmark hopes to boost its economy by eliminating cash, Shelly Banjo, Quartz, May 6th 2015
  3. This country is trying to go cash-free, CNBC, Kalyeena Makortoff, May 15th 2015
  4. The empty promises of a cashless society, Dominic Reed, Broowaha, March 28th 2016





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