Payments in Sweden 2020

Why are people in Sweden no longer using cash?

Measures against tax evasion and the banknote and coin changeover may have contributed

Published: 29 October 2020

Part of the explanation for the deviation in Sweden may be a combination of measures and events, including measures against tax evasion, the banknote and coin changeover and the introduction of Swish.

Cash leaves no traces and can therefore be used when somebody wants to conceal payments and thus avoid taxation. In recent years, Sweden has carried out reforms with the aim of reducing tax evasion. Over the period 2007-2008, tax deductions were introduced for household services (ROT and RUT) and, in 2010, a new cash register act was introduced, meaning, among other things, that anybody accepting cash payments must have an approved cash register and must print out and offer the purchaser a receipt. The Swedish Tax Agency deems that these measures have reduced tax evasion. They have thus probably also contributed to reducing demand for cash. When the RUT and ROT tax reforms and the cash register act were introduced, the volume of cash was at its highest. Since then, it fell until 2017, after which it slowly rose again.

The banknote and coin changeover may have entailed costs for those needing to exchange their cash. When old banknotes become invalid, households must hand in the cash they have had as a buffer. If holding and using cash is considered complicated, it may speed up a process in which people become used to using other means of payment. In recent years, the Riksbank has conducted a large multi-stage banknote and coin changeover. This may also have reduced willingness to hold cash. The fall in the volume of cash accelerated during the banknote changeovers (after 2013 and then again after 2016). The increase in cash volumes after the banknote changeover may be due to households and companies having gotten rid of more banknotes than they actually wanted to and thus having built up their holdings again when the new banknotes arrived.

Measures like this have also been taken in other countries over the same period and there are also Swish-like applications in other countries. However, in Sweden, the banknote and coin changeover took place over a shorter period and on stricter terms than in other countries. At the same time, Swish is relatively unique in that many banks use the same application. Other countries have several applications that cannot be used for payments and transfers between bank accounts in all banks in the same way as Swish. The exceptional situation in Sweden may thus be due to a unique Swedish combination of measures that have made cash less attractive and digital payments more easily accessible and convenient.