Nyberg: Will cash replace cards?
Deputy Governor Lars Nyberg made a speech at the Cards & Cash Payments Forum in Stockholm on Tuesday. He spoke about why cash will continue to play an important role in our payment system despite the fact that rapid technological development is contributing to the development of new, alternative payment services.
Rapid technological development is changing the world around us. New payment methods are arising. Bank cards and credit cards have become a natural part of our everyday lives, as has internet banking. In Sweden, cheques have been outcompeted and are hardly used at all. The number of paper-based giro payments is falling rapidly and it also appears that the use of cash is declining. A high level of card usage tends to go hand in hand with a low level of cash usage, and vice versa. The declining role of cash in the payment system can be illustrated by the fact that the value of the banknotes and coins in circulation has fallen from 9.6% of GDP in 1950 to 2.9% in 2010. A central question is whether new, innovative payment services will outcompete cash as a means of payment.
New payment services will probably need to compete with card payments to reach sufficiently high volumes and profitability. The strong position of cards in terms of the low cost of making an additional payment, the range provided by extensive networks, the existing circle of customers at the banks and the fact that customers are used to handling cards present strong barriers to such new payment services. The greatest potential threat to cash will therefore come from simple mobile payments and services that allow private individuals to make card payments between each other. All in all, this indicates that although cash usage will gradually decline, cash will continue to play an important role in the Swedish payment system for the foreseeable future.