newjerseynewsroom.com

BY YURI RESETOVS

NEWJERSEYNEWSROOM.COM

Sweden was the first European country to adopt bank notes in 1661 and may be the first to adapt completely to our high-tech digital age. As more and more businesses, government agencies and public services make electronic or plastic payments the norm, those who prefer coins and bills grow more and more frustrated.

Bills and coins represent only 3 percent of Sweden’s economy, compared to about 9 percent in the Eurozone and 7 percent in the United States, according to the Bank for International Settlements, an umbrella organization for the world’s central banks.

“Less cash in circulation makes things safer, both for the staff that handle cash, but also of course for the public,” says Par Karlsson, a security expert at the Swedish Bankers’ Association. The organization says that the shrinking of the cash economy is already making an impact in crime statistics: the number of bank robberies in Sweden dropped drastically from 110 in 2008 to 16 in 2011 – “the lowest level since it started keeping records 30 years ago,” reports Malin Rising for the Associated Press.

For more in finance, check out NJNR's Personal Finance Page.

A cashless system would also diminish the motif behind street muggings – what would be the point if a credit card can just be cancelled? In most Swedish cities, public transportation doesn’t accept cash; tickets are either prepaid or purchased via a cell phone text message. A growing number of businesses are starting to take only cards while some bank offices have completely stopped handling cash and make money on electronic transactions. Even houses of worship are beginning to take donations with a card swipe for those who would like to donate but do not have cash.

Numerous Swedish officials have also attempted to link cash with criminality, the black market, the “shadow” economy, and thieves, writes Alex Newman for The New American. “If people use more cards, they are less involved in shadow economy activities,” argues economics professor Friedrick Schneider.

But the biggest concerns to the public about a cashless system are the threat of cyber-security and the lack of privacy. According to the Swedish National Council for Crime Prevention the number of computerized fraud cases, including skimming, surged to nearly 20,000 in 2011 from 3,304 in 2000. As computerized and digital transactions become more commonplace, hacking into accounts and identity theft will only surge in numbers.

“If everything is traceable you start thinking about your purchasing behavior. You need cash for anonymous behavior,” says Peter Sunde, founder of the Pirate Bay and micropayment service Flattr, at the London Web Summit.  The panel “recognized how challenging it was to enter the European market, due to regulation,” reports Olivia Solon for Wired. PayPal founder John Lunn criticized the major banks and argued that we need to make the process of paying for things much easier.

“There’s no anonymity in transactions. Things go digital, and anonymity is removed. You can’t do anything about it. If you have a credit card there’s no such thing as anonymity,” says Ben Milde, founder of Dwolla, a United States-only e-commerce company that provides an online payment system and mobile payments network.

“One should be able to send money and donate money to different organization without being traced every time,” exclaims Oscar Swartz, the founder of Banhof, Sweden’s first Internet provider.

“Cash is one of the alleged banes of society that has long been in the sights of statist control-freaks everywhere,” notes analyst Pater Tenebrarum on his website Acting-Man.com, his personal commentary on the economy and markets. Why not ban cars on account of preventing car accidents? he argues.

“Fear not though — no government can really eliminate cash anyway, even though many would probably like to do so,” he says. “The reason is that the shadow economy would then simply move toward using the cash issued by a foreign nation, or would move to a gold payment system.” Even if such measures are outlawed, he believes that a cashless system wouldn’t stop underground trade. Tenebrarum argues that a ban on cash would lead to Swedes suffering from decreased living standards; by shutting down the “shadow” economy, goods and services would become far more expensive.

Hanna Celik, whose family owns a newspaper kiosk in a Stockholm shopping mall, says the digital economy is all about the banks making a bigger profit. He says he gets charged about 5 Swedish kronor ($0.80) for every credit card transaction, and a law passed by the Swedish Parliament prevents him from passing on that charge to consumers. "For them (the banks), this is a very good way to earn a lot of money, that's what it's all about. They make huge profits."

While there exists no plan to completely rule out the use of cash, this may be the first step – the beginning of a new age, so to speak.