The use of cash has declined during the pandemic in favour of cards and digital payments. Sweden has had a low level of cash usage over several years, and the same trend is becoming increasingly clear in other countries, too. One important explanation for the faster pace of digitalisation could be that many people have needed to stay home because of the restrictions to prevent the spread of infection. This has led to a lot of commerce moving from physical shops to the internet. Another important explanation could be that consumers and business operators have been worried that the virus could be transmitted via banknotes and coins. This may have caused many to choose contactless payments such as cards and payment apps. The fact that the limit for having to use a pin for card payments was raised from SEK 200 to SEK 400 in 2020 has also contributed to more contactless payments.
Use of the payment application Swish has increased during the pandemic. The increase is greatest among older people who probably stayed at home more and have instead sent Swish payments to family and friends who have shopped for them. The recent increase in use of the Swish app is also due to an increasing number of retailers choosing to accept payment by Swish. This, together with the fact that more people are using contactless payments with cards or payment apps led to contactless payments accounting for almost 60 per cent of card payments last year.
At the same time, cash is used increasingly rarely. According to the Riksbank’s survey in 2020, only nine per cent of the population paid for their most recent purchase in cash (see Cash is losing ground). According to a survey by the Government Offices of Sweden, half of the Swedish population has reduced its use of cash over the past year, which is primarily due to digital alternatives being perceived as simple and efficient. During the same period, 40 per cent of Swedes have chosen to use the Swish app more often and these payments are increasing in commerce. The reduced use of cash is also visible when we look at ATM withdrawals. During 2020, cash withdrawals declined by 20 per cent in Sweden. This decline has continued during the first half of 2021, but at a slower pace.
Increasingly common to pay using mobile phone
Number of payments Swish Handel, millions
Cash used to a declining extent in Sweden
Percentage of people paying for their most recent purchase in cash
In the euro area, use of cash has declined as a result of the pandemic, and in the United Kingdom, the number of cash payments fell by around 25 per cent in 2020. Contactless payments have increased to an equivalent extent in both regions. Similar trends are also visible in other countries, such as the United States, Australia and Canada. Despite cash being used more rarely in large parts of the world, a declining trend is not always visible in the statistics. This is because many people choose to save in cash, which means that the volume of cash in circulation has increased, despite actual use of cash declining. This phenomenon is known as the cash paradox (see FACT BOX – The cash paradox).
FACT BOX – The cash paradox
In several advanced economies, the demand for cash is increasing, at the same time as the percentage of payments in cash is declining in favour of cards and digital payments. This is a phenomenon known as the cash paradox. The paradox is explained by the general public wanting to keep cash as savings, especially in times of crisis. The paradox is visible in the statistics on the volume of cash in circulation, where the volume of cash in higher denominations, which are more suitable for savings, is increasing, while the volume of cash in smaller denominations is declining.
Sweden and Norway among others, deviate from this trend. Here, both the total volume of cash and the volume of cash in larger denominations have fallen. The volume of 1,000-krona notes in circulation has been stable for a long time at a very low level. One possible explanation for this is that when the use of cash falls below a certain level, it becomes difficult to pay with it or use it at all. Cash then also becomes less attractive as savings. In other words, it may be less meaningful to save in an instrument one believes may be difficult to use in the future.
Cash in circulation has declined over time in Sweden
Banknotes and coins in circulation, SEK million