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Sweden’s central bank puts brake on cash-free society

Sweden has been on a fast track to become the world’s first cashless society, but now its central bank is stamping on the brakes

The Swedish central bank, Sveriges Riksbank, has proposed making it a legal requirement for banks to provide cash services.

Björn Segendorf, adviser at Riksbank’s financial stability department, told Computer Weekly that the move is important in the face of rapid structural change in the Swedish payments market.

“[Cashless advances] have been beneficial, but as with every change there are certain groups who experience problems,” he said. “We see the supply of cash services being too small, and that is what we want to address with this proposal.”

The proposal, which was submitted to Sweden’s Ministry of Finance last week, stems from the the EU’s new payment accounts directive. The directive comes into force in September and gives every individual the right to a payment account with basic functions. Riksbank’s proposal goes further, obliging banks to provide basic payment functions, including cash services, in accordance with customer needs.

Segendorf said that Riksbank is not taking a stance against electronic payments, but believes that Swedish banks have acted too quickly in reducing their cash handling services. This has made it difficult to maintain access to cash services, particularly in sparsely populated areas.

“Approximately 50% of bank branches are cashless, which means at some places you can’t make a deposit or withdrawal,” Segendorf said.

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While only about 20% of retail payments in Sweden were made in cash in 2014, Segendorf said not everyone – in particular, the elderly and small businesses – is able to adapt to digital payments as fast as the market is changing. The concern at Riksbank is that not all members of society have equal access to alternatives to cash as a result of a lack of skills, equipment or internet access.

The proposal will still allow banks to scale down their cash services but only at the same speed as the fall in demand.

Essential safeguard

Christina Tallberg, chairperson of the Swedish National Pensioners’ Organisation (PRO), described the proposal as a necessary one.

“PRO welcomes digital development, but you cannot leave a group behind,” she said. “We do not accept that certain groups are excluded from the payment market. There are still situations in which there are no alternatives to cash.”

However, the Swedish Bankers’ Association strongly opposes Riksbank’s proposal, arguing it has far-reaching consequences.

Lars Rutberg, senior legal adviser at the association, said: “We have many banks in Sweden that only offer online banking services and Riksbank’s proposal would totally change their business model.”

Segendorf said that the proposal will not require banks to offer cash services in their own branches – or even to have branches – as these services could be provided through ATMs or in cooperation with third parties, such as local retailers.

Access, not format

“What is important is consumers’ access to the services they need, not how they are provided,” Segendorf said. “We want to give banks as much flexibility as possible to supply these services in the most efficient way. We don’t want to lock the market into some outdated market structure.” 

If the proposal is passed by the Swedish government, it will come into effect in September in conjunction with the EU payment accounts directive.

Whether the Swedish proposal passes or not, Segendorf hopes the reasoning behind it will have an impact.

“[If it does not pass] our proposal may have no immediate practical implications for the banks in terms of increasing their supply of services, but it may reduce the speed with which the banks can go on cutting down their supply of cash services,” he said.

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