The future for cash is more hopeful than you might think

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by Shaun Richards

This is a hardy perennial pf a subject but it now comes with a new twist provided for us by Which Money.

According to the Bank of England: ‘Like any other surface that large numbers of people come into contact with, banknotes can carry bacteria or viruses.’ So whether handling cash, debit card or credit cards, wash your hands when you get home. If you can, pay using a bank card.

That seems rather unpleasant doesn’t it? Also I do hope that the new plastic bank notes are cleaner than the old ones or the Bank of England has scored something of an own goal here. Still at least you are no longer in danger of former Governor Mark Carney dipping into into your curry.

However Which point out that many still use cash.

Many are still reliant on cash. Two thirds of those who depend on cash have no digital skills and over a third are likely to be a vulnerable customer. It may be impractical for these people to apply & learn to use a debit card for online shopping in the midst of the pandemic.

There are also age issues here.

Nearly half of those who rely or depend on cash are aged over 65, while nearly a third are aged 55 to 64. Both groups are more likely to need to self-isolate and ask friends, family or volunteers to shop for them.

Actually that reminds me of one of my aunts who is suing cash to settle with her neighbours who are kindly doing some shopping for her. I have helped her fix her internet so she could pay them online if necessary but I have no great hopes although she does realise the hygiene danger in using an ATM.

In the week the UK went into lockdown, ATM use fell by 50%, according to ATM network Link.

On the other side of the coin the banks do occassionally get something right.

The good news is that many banks and building societies have introduced the ability for you to pay a cheque in by taking a photo of it and uploading it to your mobile bank app.


Now let us have a ying to the yang above as Sweden is the country which has moved the furthest in terms of using electronic money.

Cash is used to a lesser extent. The figure shows that the proportion of those who paid for their most recent purchase in cash has decreased from 39 per cent in 2010 to 13 per cent in 2018. (As from the beginning of 2018, the question refers only to purchases in physical shops). Source: The Riksbank.

If we switch to a more modern payment method which is using your smartphone then according to the Riksbank it is now as popular as using cash.

Number of payments by Swish increasing sharply. The figure shows that the number of Swish payments (millions of payments per year) made by mobile phone (in real time) has increased from 0 in 2012 to 400 million in 2018. Source: Bankgirot.

On a personal level I remember being impressed when the patient ahead of me paid for their physio with their phone which let me putting some notes in my bag feel a little antediluvian. But on the other hand I have seen people getting into a mess trying to pay that way at the supermarket. The trend are clear though.

 In ten years, the average Swede has doubled their card use.

Cash in circulation has been dropping for some time but there has been something of a reversal in recent times. For example it was over 100 billion Kroner in 2010 and fell to 57 billion in 2017 but has since picked up to 63 billion so we will have to see. The rally is of course minor compared to the previous drop but is intriguing when for example the use of smartphones for payment might make you think it would drop further. Maybe negative interest-rates have had an inverse effect in the same way they have boosted saving.

Speaking of negative interest-rates there have been some ch-ch-changes in approach and the emphasis is mine.

At today’s monetary policy meeting, the Executive Board has decided to continue the purchases of covered bonds and government bonds until the end of September, and to hold the repo rate unchanged at zero per cent. The Riksbank is prepared to continue to use the tools at its disposal to  support the economy and inflation.

This is very significant because it previously was one of the standard-bearers for negative interest-rates. Having plunged into their icy-cold grip early in 2015 they only ended the experiment at the end of last year and went as low as -0.5%. Yet in spite of the economic situation described by them below they have not returned.

The great uncertainty over the course of the pandemic
means that the Riksbank, in this report, has chosen to discuss developments on the basis of two different scenarios, rather than a single specific forecast. In these scenarios, GDP in Sweden this  year will be 7 or 10 per cent lower than in 2019, respectively, at  the same time as unemployment will rise to close to 10 or 11 per
cent, respectively.

Staying with the cash issue we now see that unless there is yet another U-Turn from the Riksbank it will not be put under pressure by the establishment lust for negative interest-rates for some time if at all. Of course for the Riksbank this means it has run negative interest-rates in a boom and raised them in a collapse which gives them something of a dunce’s cap or as Madness would put it.

You’re an embarrassment


There are many different perspectives here. I have looked at Sweden moving away from negative interest-rates and in a minor way ( banks only) Japan nudged away a little yesterday. On the other hand the Euro area seems firmly in their grasp. There have been rumours about New Zealand today which look just that for now but also ones about the US Federal Reserve. However I think they are not the central banking go to they once were not because of any concern for us but because of The Precious.

The reach of negative rates is limited, however, because commercial banks find it hard to charge negative rates to their retail depositors, who might choose to hold their wealth in cash. ( St. Louis Fed)

Of course ambitious young central bankers will be trying to think up ways of subverting this.

Also whilst Sweden has seen less cash in circulation others have seen it rise.

There are over 70 billion pounds worth of notes in circulation…….That is roughly twice as much as a decade ago… ( Bank of England)

The US has seen a not dissimilar pattern with the amount of cash in circulation being US $942 billion back in 2010 but US $1745 billion in March this year.

So the in spite of moves like the phasing out of the 500 Euro note by the ECB there is in fact more cash around in many places. So it is not dead yet. As ever the official campaign to discredit it goes on.

Large sums are also likely to be held overseas or for illegal uses: the so-called ‘shadow’ economy. ( Bank of England)

Meanwhile the large amounts of banking fraud going on is something they hope you will not spot although to be fair the Riksbank of Sweden gives it a mention.

The number of frauds with stolen card details or identities has increased, for example.


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