In an interview, Henk Esselink, head of the issues and circulation section for the currency management division at the ECB, warns of the side effects of Swedes losing the option to pay with cash. After debunking several cashless myths, Esselink explains that stakeholders in the cash cycle must join forces to keep cash available by providing a good coverage of the ATM network, while retailers should continue to accept cash.
In response to the interviewer’s enthusiasm about claims of Sweden turning into a cashless society in the coming 5 years, Esselink explains that people not having access to cash would be “a bad thing”. He names the social exclusion for certain groups in society that comes with abandoning cash, the fact that the Riksbank (the Swedish central bank) conducted research in 2018 in which 31% of the population said they withdraw cash one to three times a month, and 6% said one or more times a week, and that Sweden saw an increase in banknotes and coins in circulation in value terms in 2018 compared with 2017.
Additionally he debunks myths about cash being a more expensive payment method than non-cash, a cashless society ensuring the disappearing of theft, tax evasion or money laundering, and cashless being the holy grail to abolish the shadow economy. “Interestingly, although Sweden is the country with the lowest use of cash in Europe, it is not the country with the smallest shadow economy.” Esselink also explains how without cash the whole retail payment system would rely on two international card schemes not located in the EU.
Esselink, co-author of the 2017 ECB paper ‘The use of cash by households in the euro area’ that challenged the perception that cash is rapidly being replaced by cashless means of payment, says that the main cash payment trends are that in certain countries we will see ‘less cash’ (not cashless), cash being increasingly used for smaller value payments, and cash being recirculated more locally.
When asked how to deal with the challenges of declining volumes of cash, Esselink replied that “All stakeholders in the cash cycle, including central banks, commercial banks, cash management companies and retailers must work together to keep the cash distribution and handling efficient with declining volumes.” Read the full interview here.