The Swedish experiment

[Dave Birch]Within the narrow confines of this blog, Sweden is one of the favourite geographies, partly because it is struggling with cash and partly because it is more transparent than some other banking systems.

The Swedish central bank published some detailed figures on the cost of payments and they provide useful input to the debate on the future of payments. They show that on average the variable cost of an ATM cash withdrawal to the issuing bank is around 1.3 SKr

[From Digital Money Forum: Cost dynamics, again]

Well, that doesn’t sound like very much. But in Sweden, it multiplies up to a big fraction of the economy because the Swedes are heavy ATM users.

Stefan Ingves (the Governor of said Central Bank) said that Sweden has “many more” cash transport robberies than its neighbours because, essentially, cash withdrawals from all ATMs are free (despite the large costs entailed in cash handling). This means, in turn, that Swedes use cash far more than Finns, Danes, Norwegians and (especially) Icelanders.

[From Digital Money Forum: The Cash Menace up North]

Mr. Ingves also notes (in the speech referred to above) that Sweden has far more cash-in-transit robberies than its neighbours and suggests an alignment of the private and social costs: the cost of armed robberies, he said, should be accounted in the cost of cash. This means that far from being free at ATMs, cash in Sweden should be expensive. He is, of course, completely correct.

Why am I talking about Sweden? I happened to be working with one of the Swedish banks last week, and one topic of conversation was the one that Chris Skinner makes reference to today: the recent massive cash heist in Sweden.

In the early hours of Wednesday 23rd September, a helicopter over the G4S Security Yard in Stockholm and bombed open the cash boxes stealing almost $150 million in cash.

[From The Financial Services Club’s Blog: Daylight robbery the Swedish way]

Astounding. They got away with $150 million in cash. That’s more than the board of an investment bank (no, it isn’t, Ed). But the detailed story is even more amazing than it first appears at first.

The masked gunmen jumped out on to the roof of the G4S cash depot in the Västberga area just after 5am, smashed windows with a sledgehammer and made their way inside… Once the gang was inside, witnesses reported hearing several loud bangs. The helicopter casually hovered for 15 minutes waiting for the men to load up bags of stolen cash from the roof-top… Meanwhile, a police Swat team was seen desperately trying to enter the cash depot with a battering ram. The police were unable to call out their own helicopters because suspected explosives had been placed at the aircraft hangar in a bag marked “bomb”.

[From Gang use helicopter in Hollywood-style raid on Swedish cash depot | World news | The Guardian]

Why they couldn’t just shoot the helicopter down I don’t know — probably some kind of health and safety issue — but the point I wanted to make is just that even the staid and conservative Swedes are beginning to the think the unthinkable.

Computer Sweden writes that cash is an invitation to crime. Legislators, banks and retailers are to blame for having failed to eliminate cash usage – despite cards having been around for 30 years on a large scale. Not only are piles of cash inviting robbers – it is also the enabler of drug trade, prostitution, illegal gaming, etc. Without cash these activities would have a hard time… The story concludes by encouraging new signs: “We do not accept cash.”

[From Cash for crime]

I’m all in favour of a more aggressive “war on cash”. But we need a carrot as well as the stick of higher pricing for cash. We have to show businesses that making use of e-payments, which are a good thing for society, is good thing for them too.

In June, American became the latest domestic carrier to stop taking cash on its flights. Representatives for it and other airlines with similar policies, including United, Southwest and JetBlue, said this week that in-flight sales had grown since they stopped accepting cash.

[From ‘Cards Only’ Merchants Break From Anti-Interchange Pack – American Banker Article]

That’s a good message to pass on to law-abiding tax-paying merchants who are fed up with being undercut by those with a less diligent approach to book-keeping: no cash means more sales. I know that for one of the UK merchants rolling out contactless terminals, the uplift over cash is about 8%, which is not to be sniffed at in these difficult times.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]