We used to talk about the “Scandinavian model” when talking about the mixed economy and welfare state. But I’m interested in the other Scandinavian model.

In the UK we love a good episode of The Killing or The Bridge. I’m a big fan. (Wallander not so much.) One thing I kept thinking when watching The Bridge recently was how the mobile phone had been integrated into the crime drama. The mobile phone changed crime drama for good. Now you have to have complicated plot devices around why someone doesn’t have a phone, or a signal, or has two phones, or can’t be tracked or whatever. Then it occurred to me that when the Scandinavians get rid of cash, they will have to rewrite the crime drama again.

Get rid of cash? Yes. Look at how things are developing over there. In Sweden for example. In the old days, there were domestic debit cards in Sweden: BankKort and Sparbankskort. These were free to customers, who mainly used them to get cash from ATMs. Credit card volumes were low. By comparison with their Nordic neighbours, the Swedes were heavy users of cash (and hence saw far more armed robberies than their neighbours.

In 1995, the Swedes decided to ditch the domestic debit cards and replace them with scheme cards. So Visa Sweden and EuroPay Sweden sprang up — with a system of bilateral interchange fees (there are now 29 issuers and 10 acquirers who have these agreements, which are not seen — as I understand it — by Visa or MasterCard) — and began to market cards as an alternative to cash. And they had success. Today, there are no paper cheques and debit card transactions dominate at point of sale.

If you look at Swedbank as an example, they have seen debit card transactions go from 12m in 1995 to one billion today while ATM transactions have grown only from 50m to 85m. A pretty successful effort by any measure. More than 97% of Swedes have debit cards (these are issued to citizens from the age of seven years up, with parental permission) and more than 99% of merchants accept cards, with the consequence that 80%+ of retail transactions are card (it’s about half in the UK and about two-thirds in the US).

The Swedish Central Bank’s goal has begun to be achieved, in that Sweden is one of the few countries in the world where the cash “in circulation” is actually falling. However, as the Riksbanken said back in 2012, the use of cash even in Sweden is still far too high compared to where it should be on the basis of social costs (because debit cards have the lowest total social costs. They want to drive cash usage down still further.

Niklas Arvidsson at the KTH Royal Institute of Technology in Sweden predicts that paper money and coins will disappear from Swedish society – “but probably not before 2030,” he says.

[From The cashless society is closer than you think | ScienceNordic]

Cards will not, of course, be the final nail in the coffin for Swedish cash. That honour will go to the mobile phone. But there is still work to be one.

“It would also have to meet several requirements, such as good emergency backups. People would need to be able to pay even during power cuts, or when electronic systems crashed or were hacked. Currently cash payment is the only system that never fails, so it’s difficult to see how we could go totally cashless.”

[From The cashless society is closer than you think | ScienceNordic]

As I’ve mentioned before on the blog, the reason why I am curious about the Swedish situation is that in Sweden the anti-cash alliance is a broad church, embracing not only banks and law enforcement but the trade unions and the retailers.

Swedbank is piloting the use of mobile couponing with merchants in Uppsala, the country’s fourth-largest city which is bidding to eradicate cash as part of a local crime-fighting initiative.

[From Finextra: Swedbank pilots mobile couponing in cashless utopia Uppsala]

Not everyone is heading down this same path, though. While most of the bank branches in Sweden are now “cashless”, there are still reactionary forces at large.

In fact, for three of the four major Swedish banks combined, 530 of their 780 office no longer accept or pay out cash. In the case of the Nordea Bank, 200 of its 300 branches are now cashless, and three-quarters of Swedbank’s branches no longer handle cash… Fewer then 10 of Handelsbanken’s 461 branches currently do not handle cash and the bank’s goal is to have cash in every branch by the first quarter of 2013.

[From Sweden’s War on Cash Runs Into a Wall–and a Heroic Bank :: The Circle Bastiat]

Hurrah for competition. So long as the three major bank’s electronic payments are not cross-subsidising Handelsbanken’s cash then no problem. When I say that the anti-cash movement is broadly-based, by the way, I really mean it. And they have a great figurehead too: Bjorn from ABBA. I loved the interview with him in the “Digital Values” magazine, where he comments that Sweden, Denmark and Norway would be the ideal countries to go cashless first (of course, I’m hoping Scotland will beat them to it after hearing my talk to the FS Club in Edinburgh back in April). But listen to him: he is spot on!

• Go Bjorn! “It is completely incomprehensible why Sweden’s central bank is to issue a new series of notes from 2015”
• Go Bjorn! “Who needs 500 Kroner or 1000 Kroner notes?” (and as far I as understand the situation, the Swedish banks have said essentially the same thing to the central bank).
• Go Bjorn! “The problem of begging isn’t a problem of payments or payments technology”

What a guy. He’s even made the ABBA museum cashless! And when asked about that, he said “some people asked did we want to frighten away the Russians with their bundles of notes”, which might well be a more general comment about activities in a number of European capitals. Incidentally, in the same magazine, Professor Kai Olsen notes that, of course, going cashless wouldn’t eliminate crime but goes on to say that if the Nordics went cashless they would at least export some of their Eastern European criminals (“Digital Values”, p.44). Which brings me to a serious point, that I raised following a super presentation by Kurt Gjesten from the Pan-Nordic Card Association at the PayComm MEETS 2014 event. Why aren’t the general public more outraged about the use of cash to support — indeed, subsidise — a variety of nefarious activities?

Like many other Greeks, Mr. Mantzouranis said, Mr. Kantas would bring bundles of cash to his banker, who would fly to Switzerland to make the deposits when enough cash had accumulated to make the trip worthwhile.

[From So Many Bribes, a Greek Official Can’t Recall Them All - NYTimes.com]

I spoke to Kurt later in the day and we concluded that we (ie, the payments industry) need to become considerably more effective at communicating these issues to the general public. We can’t blame them for remaining ignorant about the pernicious and revolting impact of cash on our civilised society if don’t make an effort to explain them. I intend to start right away.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Scandinavian models and Russian cash appeared first on Tomorrow's Transactions.

We should be letting coins fade away, not wasting time and money on redesigning them.

You may have noticed that the British government has decided to react to the demands of the modern technological always-on super-connected digital economy by… redesigning the one pound coin. This is because of rampant counterfeiting, some of it apparently coming from The Netherlands, which meant that something like 3% of the coins in circulation were bogus. Hence George Osborne’s decision to drag us kicking and screaming into the 17th century by redesigning the coinage: we are to have new dodecahedral pound coin. What a total waste of time and money.

Industry chiefs insist the bill for converting parking meters, vending machines and phone boxes to take the new £1 coin could be as much as £100million.

[From New pound coin will mean £100 million bill to convert EVERY vending machine, parking meter and shopping trolley in Britain | Mail Online]

Phone boxes? There are phone boxes that don’t take cards? Oh well. But as for vending machines that take coins (which I never use) and parking meters that take coins (which I haven’t seen for some time), my question is, then: why bother? If the parking meter operators can’t detect the counterfeits, and get stuck with a 3% fraud rate, well, tough. Instead of wasting money installing new pound coin readers, they may well just forget about taking cash at all in vending machines and go to contactless and mobile payments.

And before anyone says “yeah well but what about excluded groups who don’t have a bank account or a mobile phone”, I say: prepaid cards since the results of our work on the Cabinet Office Alpha project in South Yorkshire, presented at our annual Forum this year, show clearly that a prepaid account linked to both an EMV card and a mobile wallet was not only a feasible but a desirable and successful mechanism for the excluded. It’s only a shame that Telefonica decided to can the mobile wallet that we used in the pilot!

To be honest, I’m baffled as to why parking meters in particular take coins at all in 2014. The cost of collecting the money is high even when things work properly, and the it approaches 100% when they don’t.

Thieves are using doctored pound coins to scam city parking meters in an attempt to fleece the Liverpool taxpayer of thousands in cash..

[From Thieves target Liverpool parking meters with doctored pound coins - Liverpool Echo]

This sort of thing used to go in central London as well before mobile phone parking took over, and with serious consequences.

A gang of Albanian assassins murdered a rival in a feud over the right to steal from London’s parking meters, a court has heard.

[From Albanians 'shot rival over parking meter theft' (From This Is Local London)]

There is no point is tossing good municipal money after bad by replacing these old parking machines with new parking machines that are exactly the same as the old ones (ie, that concentrate money in useful on-street locations for criminals).

Incidentally, there is a new technology angle to the story. The Royal Mail are trumpeting the addition of new technology so that the pointless and expensive exercise in replacing the coins can be augmented by pointless and expensive machines so that banks can detect counterfeits and automagically reject them when you empty your tip jar into the machine in the branch.

The iSIS currency system can be authenticated via high-speed automated detection at industry-leading levels and is harder to counterfeit and easier to detect than any coin before it.

[From iSIS]

We should not be investing in producing coins with a better anti-counterfeiting coating, we should be letting coins fade into oblivion, starting with an immediate end to the production of 1p and 2p pieces. The Irish, having done a controlled experiment around continental-style “rounding” have come to precisely this conclusion.

A new national survey shows that they favour the withdrawal of 1c and 2c copper coins.

[From Time for change as 85pc want to banish coppers - Independent.ie]

The Irish experiment took place in Wexford, where customer and retailers were taught to round transactions to the nearest 5 cents. So you pop down tot eh sweet shop with no expectation of using coppers in your transactions. If your sherbet dabs come to €1.02, you hand over a euro coin walk away content. If your gobstoppers add up to 98 cents, the same.

Research has shown consumers and businesses well disposed towards a phasing out of 1 and 2 cent coins because

1. They are inconvenient to handle and carry
2. The cost of counting and storage is greater than their value
3. Other EU countries have effectively phased them out
4. The cost of making 1 and 2 cent is greater than their value and has a negative impact on the environment.

The Rounding Trial rules are simple and fair for all.

[From About the Trial | Wexford Rounding Trial]

Surely it should be a matter of obvious national priority for us to follow the excellent Irish lead here.

These are the personal opinions of Consult Hyperion and its guests and should not be misunderstood as representing the opinion of its clients or suppliers. To discuss how any of the technologies discussed in this post can benefit your business, please contact Consult Hyperion.

The post Let the coins go appeared first on Tomorrow's Transactions.