A cashless society in a few years’ time: is your company ready?

A cashless society will soon be a reality. Very soon. In Sweden, that time may come as soon as 2023. We investigate what factors are driving the development towards digital payments and ask what measures small and medium-sized enterprises should take.

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Fewer and fewer Swedes are paying with cash; many want to go cashless entirely. The same applies for more and more companies. Small and medium-sized enterprises in particular are happy to avoid expensive and inconvenient transactions with cash. Developments towards cashless solutions are moving quickly. It is estimated that Sweden will be completely cashless as soon as 2023. What is driving this development? And what should small and medium-sized enterprises do about it? Let’s find out.

Fast development towards a cashless society

The development towards a cashless society in Sweden has accelerated a lot in recent years.

The Swedish central bank carries out a survey on payment behaviour of the Swedish population every two years. For the survey carried out in 2018, around 2,000 randomly selected people aged between 16 and 84 were interviewed. One of the questions was: ‘How did you pay for your last purchase in a [bricks-and-mortar] shop?’ Only 255 of the 2,011 people surveyed answered with cash. That is equal to 13% of the population. In 2010, the share was 40%.

The retailers’ perspective

The labour market parties within retail lead the Swedish Retail and Wholesale Council, designed to develop the retail trade together with its companies and employees. They financed a survey of retailers in the most cash-intensive sectors (e.g. food, tobacco goods and kiosks, shoes and clothes, sport and leisure, furniture and fittings, construction materials and hardware, and electronics) carried out in 2017.

741 retailers responded. The typical retailer in the survey has four full-time employees, a turnover of seven million krona (~ 650.000 €), excluding VAT, per year, and has an average transaction of 300 krona (~ 28€).

The retailers answered the question of how high the proportion of sales paid for in cash is with 18%.

Share who paid for their last purchase in a bricks-and-mortar shop with cash

Sweden will soon be a cashless society

The primary aim of the Retail and Wholesale Council when financing the survey was not to find out how many people pay with cash or digital payment. They had a far more interesting question.

According to the Swedish central bank, payments with coins and notes are decreasing by a dizzying 15% per year. Beyond a certain point, the share of customers paying with cash will be so small that accepting payments of that kind will no longer be worthwhile for retailers. When will that be?

That was the question for researchers from the KTH Royal Institute of Technology, the Copenhagen Business School and the central bank to answer on behalf of the Retail and Wholesale Council.

The answer?

On 24 March 2023.

Economic rationality on the two-sided market

The researchers reached their surprising answer through the creation of a mathematical model based on the theories of two-sided markets and economic rationality.

In simple terms, we can say that a two-sided market has two kinds of participants, who both benefit if there are more participants of the other kind.

Economic rationality means that a company makes decisions that ‘satisfy’: as much information as possible is recorded and analysed within a certain time period and a decision considered satisfactory is taken.

This is why cash payments will no longer be worth it

The researchers view each payment method (credit card, hard currency, etc.) as its own two-sided market. For a payment system to work, there have to be lots of people who can pay with it and lots who can accept that payment form.

In this case, economic rationality means that retailers should make decisions that either increase income, reduce costs or possibly lead to a more economical combination. An economically rational decision could be, for example, accepting the payment method with the lowest costs.

On the basis of these assumptions, the researchers created a formula to calculate the point in time at which carrying out transactions with coins and notes would no longer be economically rational.

The formula has three unknown variables: fixed and variable costs and the profit margin of the retailers. The researchers got these values from the survey of 741 retailers. When they entered those values into the formula, the result was 24 March 2023.

The cash market is imploding

Of course, it will not be exactly 24 March 2023 that using cash will no longer be worth it. According to the researchers, that will happen even earlier.

When a two-sided market is growing, there are only a few participants on each side. That means the number of possible relationships between the participants on the different sides is also low. But with each additional participant, the number of possible relationships grows exponentially. That leads to the market growing slowly to begin with and then increasingly quickly.

But the same applies the other way around, too.
As soon as consumers and retailers stop using cash, the value of cash as a payment decreases – slowly to begin with, and then ever faster. Ultimately, the cash-based payment system implodes.

For practical reasons, the researchers did not consider the increased speed of change, which is why 24 March 2023 is probably an overestimate. Dealing with hard currency will become unprofitable before then.

Factors speeding up the development

The increased speed of change is down to several factors.

One factor is the cost of handling cash, which is increased by the fact that the fixed costs for this system have to be covered by ever-fewer retailers. Even today, the average costs for payment with coins and notes, including working time, are 4.1% of the sales sum. The corresponding costs for cashless payment by credit card are 0.4%.

Another factor is that additional retailers will join in once some start rejecting cash payments. This causes a cashless trend in which retailers, and perhaps even consumers, imitate each other.

Why Sweden?

Why is Sweden in particular on the way to becoming the first cashless society?

Above all, the country has a relatively well-educated and IT-savvy population who are quick to accept technological innovations. This has led to quick acceptance and spreading of new payment solutions.

In general, consumers in Sweden are highly trusting of authorities, institutions and companies. They are therefore not so concerned about whether the state or a company might spy on their private business.

Put together, all this makes for the perfect fertile ground for innovative cashless payment solutions.


Some financial-technology companies with a very promising future have been founded in Sweden in recent years. One of those is Klarna, which has revolutionised electronic retail with its solutions. Another is iZettle, which developed the first card payment solution for mobile payment via smartphones.
But perhaps the most revolutionary banking solution comes from Sweden’s six major banks: the smartphone app Swish, which is used by seven million of Sweden’s ten million inhabitants for 44 million payments a month.

With Swish, Swedes send each other money straight from their digital wallet using their mobiles and can pay just as easily in bricks-and-mortar shops or online. The digital wallet makes it simple to manage mobile payments. ‘Swishing’ money is just as easy as sending a message.

The banking app is used everywhere. Almost 25% of Swedish companies can accept payments with Swish.

Heavens, even the church uses Swish to collect the offertory!

What you should take away

The question is not whether, but when your country will become a cashless society. It might well be sooner than you think. Sweden, together with its Nordic neighbours, might be leading the way for cashless payments, but the rest of Europe is close behind.

You should therefore consider what payment types you want to steer your customers towards. Keep in mind that every payment solution has its own two-sided market and the market that can attract the most participants can also grow the fastest.

You should also estimate now how much dealing with cash costs you at the moment. Don’t forget to include labour costs for the time required. It is probably more expensive than you think.

Ultimately, you have to consider what it costs to forego cashless payments, until you accept that method of payment.

Prepare well. Once it has arrived, the change towards cashless payment, will unfold very quickly.

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