Payments Report 2022

Payments in stores are rarely made in cash

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In a crisis, different means of payment are needed

Published: 15 December 2022

Many withdrew cash after Russia’s invasion of Ukraine

When Russia invaded Ukraine on 24 February 2022, many were reminded of the Swedish Civil Contingencies Agency’s (MSB) recommendation to have cash at home. That week, the number of withdrawals from Bankomat ATMs increased by 28 per cent. According to the Swedish Trade Federation, the use of cash in commerce did not increase in connection with the withdrawals. This suggests that cash was withdrawn for contingency purposes and saved at home.

The Swedish development was not unique. Withdrawals increased in many countries, especially in countries bordering Russia or Ukraine (e.g. Poland and Lithuania). In addition, it is common for individuals to withdraw extra cash in times of uncertainty. Since the 2008 financial crisis, cash withdrawals have increased in many countries, which may be due to the public’s preference for cash as a means of saving in times of crisis (see FACT BOX – Decline in cash in Sweden stands out internationally).

Not all payments can be handled in cash during a crisis

One reason why it is important to have cash at home is that it can be difficult to get hold of during a crisis. Cash management is dependent on, for example, electricity, data communications and transport and can be affected by disruptions to such functions. The only cash that is certain to be available in the event of a disruption is that one already has at home and in one’s wallet (see Cash services depend on electricity and data communications).

But cash cannot be the only solution for payments in times of crisis. It cannot replace all digital payments in society, especially large electronic payment flows such as salary payments, pension payments and invoice payments. Moreover, relying on one payment method alone is vulnerable.

It is therefore important that digital payment methods also work in a crisis and that individuals have access to different payment instruments. For example, in addition to cash, it can be useful to have access to mobile applications such as Swish, to have cards from several issuers and to be able to identify oneself digitally in different ways.

FACT BOX – Payments in wartime: Experiences from Ukraine

The Riksbank is responsible for ensuring that the general public in Sweden can make the necessary payments in peacetime crisis situations and in the event of increased preparedness. The National Bank of Ukraine (NBU) has a corresponding role. The Riksbank can learn from Ukraine in ways that can help strengthen Sweden’s preparedness. The Ukrainian payment market was relatively digitalised when Russia began its full-scale invasion war on 24 February 2022. For example, data from the World Bank show that 72 per cent of the population over the age of 15 had a credit or debit card in 2021 and that 62 per cent had used a mobile phone to make a payment. In Sweden, the degree of digitalisation is even higher (see In Sweden we prefer to pay digitally).

According to the NBU, digital payments have worked well during the war. There have been no major disruptions to the PROSTIR national card network or the international card networks. The central settlement system in Ukraine (SEP), which is provided by the NBU, has been in operation 23 hours a day throughout the war.

One important reason why the payment system worked well is that the NBU and other participants in the payment market were well prepared for how they should act. Since Russia began the war in eastern Ukraine in 2014, the NBU, together with financial and payment market participants, has been preparing itself for further Russian aggression. For instance, they have developed detailed contingency plans and carried out joint exercises. In addition, the NBU has prepared to continue to operate from different locations in the country. Banks were given the right to place their information resources in cloud storage outside of Ukraine.

On the same day as the full-scale invasion began in February 2022, the NBU was able to quickly put in place a number of measures aimed at reducing financial stability risks and maintaining public confidence in the financial system. Among other things, the exchange rate for the Ukrainian currency Hrvynia was locked and the possibility to purchase foreign currency was restricted. A full deposit guarantee was also introduced for accounts in Ukrainian banks.

The NBU called on the public to use digital means of payment as widely as possible. They also called on the public to withdraw cash from shops rather than ATMs or bank offices. The purpose of this is to minimise the need for cash transports to and from shops, banks and ATMs.

The experiences of the war in Ukraine show the importance of both government and private actors being prepared to respond to crisis situations and to heightened alert.

Following the Russian invasion, many Ukrainians have fled to other parts of Europe. The NBU therefore signed agreements with several central banks in European countries, including the Riksbank, which enabled Ukrainian refugees to exchange Hrvynia in cash for local currency.