1. IssueOne/2014
by Nets
by Nets
Money, Money,
Money- but not in cash
Former member of ABBA Björn Ulvaeus has a vision for Sweden
Are people ready
to go cashless?
New Nordic survey
sheds light on the
matter
Cash or digital
payments?
A simple question
worth billions of euros
Say goodbye to large
notes
How removing them
can reduce moonlighting
and crime
Reaching the next level
of payment evolution
Will consumers stick to
banks as providers of
payment instruments?
IssueOne/2014
Issue One / 2014
Theme:
Towards
cashless society
01-01-2014_1
2. january 2014, Copenhagen, Denmark.
2013 Digital Values by Nets®. All rights reserved.
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3. About Nets
Nets specialise in managing digital values through the delivery of strategic consulting and IT solu-
tions. We enable a more efficient society and optimise our customers’ business through the way
we handle money, information and identities digitally. We have one of the most extensive product
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Find out more about us at www.nets.eu.
4. Table of contents
The value of digitisation for the future
Nets’ CEO Mette Kamsvåg welcomes
you to the first issue of Digital Values.
The use and cost of cash across
Europe
Europe is anything but homogenous when
it comes to the use of cash and the digital
alternatives. However, clear patterns are
emerging from region to region.
The consumer paradox of cash
and the Scandinavian opportunity
Consumers in Sweden are favouring card
payments over cash in most situations.
Given that, it seems plausible that con-
sumers would not be concerned if cash
disappeared. But do consumers’ ideas
harmonise with their actions? According
to Niklas Arvidsson, Associate Professor
at the Royal Institute of Technology in
Stockholm, they do not.
Money, Money, Money
– but not in cash
He advocates digitisation in Sweden,
he wants to see cash consigned to the
scrapheap, and he has just opened his
own – cashless! – museum. Read our
interview with Björn Ulvaeus, one of the
two Bs from the legendary 1970s pop
group ABBA.
ABBA The Museum
ABBA The Museum – perhaps the first
cashless museum in the world – opened
to the public in May 2013 in Stockholm,
Sweden.
In brief …
Cutting through complexity – reaching
the next level of payment evolution
Payment solutions today rest on the
pillars of globalised card infrastructure
and transfers using automated clearing
houses. Will the information age with its
technology-driven avalanche of innovative
consumer offerings change this, or will
consumers stick to banks as providers of
payment instruments?
The Nets suite of mobile services
Nets is in the process of bringing to market
a suite of mobile services that will allow
banks and merchants to interact with
consumers in new ways without having
to replace current processes and systems.
The cashless society is the way ahead
Although many shops and customers
like cash payments, the Danish Chamber
of Commerce recommends that shops
should be allowed to decide for themselves
whether they wish to accept cash, going
forward.
6
8
10
16
24
25
26
32
34
4
Digital values
5. Table of contents
Dansk Supermarked ready for
contactless payments
TheDanishretailchainDanskSupermarked
is preparing for a future without cash.
The first steps are the introduction of
new terminals that will ultimately enable
consumers to pay using contactless cards
and mobile phones.
In brief …
Exporting the cashless society
The Nordic countries are in a unique posi-
tion to create the world’s first cashless
region. It would save them billions of
kroner, e.g. by reducing moonlighting,
and could even be the start of a highly
lucrative export adventure. Read our
interview with Norwegian Professor of
informatics Kai A. Olsen.
Cashless shouldn’t equal helpless
Digitisation and the development of new
digital payment solutions need to take
all groups in society into consideration.
Some groups face particular challenges
that need to be addressed and dealt with.
Empowering people through digital
payments
The world’s poorest people are hugely
dependent on cash. This contributes to
keeping them in a vulnerable position.
According to the Bill & Melinda Gates
Foundation, financial inclusion and digital
payments are part of the solution.
Nordic cash survey
A brand new survey shows that a weekday
without cash is fine for 56% of Nordic
consumers. Still, most agree that access to
paying in cash is a right everyone should
have. Perceived convenience and habits
are the main drivers for using cash.
Nets’ view:
Let’s cash in on digitisation
What conditions must be met if a country
or a region wants to realise the vision of
a cashless society?
Towards the digital wallet
New contactless payment solutions using
a card or mobile phone have obvious
advantages for banks, merchants and
consumers alike: faster, cheaper and
simpler transactions with less cash and
greater security. Eika Kredittbank is one
of the first banks in Norway to implement
these solutions.
New payment trends in Finland
The Ministry of Employment and the
Economy in Finland has set up a working
group to find ways to reduce the use of
cash in the Finnish economy.
In brief …
Notes
36
39
40
50
52
56
60
66
70
73
74
5
Cashless society
6. Digital Values is published by Nets, and it is
our ambition to create a magazine packed with
high-quality articles and interviews that take a
probing look from various perspectives at the many
opportunities and challenges presented by digital
developments in society today.
In particular, we will be addressing the aspects
of digitisation that are also the main part of Nets’
DNA, i.e. digital money, digital identities and digital
information. That is what we call digital values. Each
issue of the magazine will deal with a selected theme,
and in addition to our own staff writers, we will
invite external sources to contribute knowledgeable
insights into the theme in question.
The theme of this first issue of Digital Values is
barriers and opportunities on the road to a cashless
society. In a series of articles and interviews, we
examine progress so far within and beyond the
NordicRegionwhenitcomestoreducingtheamount
of cash in circulation, the positive arguments for
striving towards a cashless society, and the obstacles
to be overcome along the way.
One of the key areas, when it comes to the
advantages of eliminating cash, is moonlighting
and criminal activity, which is largely dependent on
high-denomination notes in particular. We discuss
The value of
digitisation
for the future
this with Norwegian Professor Kai A. Olsen from
the University of Bergen – see p. 40 – who has been
working with this topic for a number of years. He
believes the countries that choose to go all the way
with digitisation of payments will be able to reduce
moonlighting and, in addition, the vision of the
cashless society could become a valuable business
case in itself.
The Swedish Associate Professor of Industrial
DynamicsatKTH(theRoyalInstituteofTechnology),
Niklas Arvidsson, points out – see p. 10 – that
although cash payments have been decreasing in
Sweden for many years and although the Swedes
prefer digital payments in their daily life, the major-
ity of the population still consider cash almost a
human right.
Niklas Arvidsson calls this phenomenon “the
paradox of cash”, and our own Nordic survey – see p.
56 – conducted especially for this edition of Digital
Values confirms the paradox: on the one hand, the
market overall is evolving towards digitisation; only
45% of Nordic consumers carry cash on a daily
basis and many consumers proactively avoid using
cash. On the other hand, 53% still agree that access
to paying in cash is a right everyone should have.
Overall, Danish consumers seem to be more willing
Welcome to the first issue of Digital Values, which will
be published twice a year in the Nordic Region and
northern Europe.
6
Digital values
7. than any other consumers in the Nordic countries
to accept a cashless society. Finnish consumers
seem to be the most reluctant.
Underthe optimistic headline “Cashless shouldn’t
equal helpless” – see p. 50 – Sverre Fuglerud from
The Norwegian Association of the Blind and Partially
Sighted (NABP) points out what it would take for
blind people and other disabled people to experi-
ence a future of digital payment solutions as an
improvement in their everyday lives rather than
yet another barrier.
Inthesamevein,TorbenE.HoffmannRosenstock,
chief consultant at Denmark’s largest trade organisa-
tion, the Danish Chamber of Commerce, contributes
an article – see p. 34 – on the potential for reducing
the number of shop robberies if Danish shops were
grantedthefreedomtodecideforthemselveswhether
or not they wish to accept cash.
Furthermore, we met Björn Ulvaeus, best known
as a member of the former super-group ABBA,
but who is now a keen advocate of Sweden’s need
to exercise its potential to become the world’s first
cashless society – see p. 16.
Finally, we also present a number of articles by
Nets’ own staff, looking for instance at the costs
of using cash incurred by merchants, banks and
society at large, and offering some suggestions as
to which new payment solutions will contribute to
further reducing the amount of cash in circulation
and supplementing the types of digital payment we
are already familiar with.
We hope Digital Values will be of value to you,
the reader. And to ensure the magazine is as relevant
as possible, we would welcome comments and sug-
gestions from our readers. Feel free to write to us
at digitalvalues@nets.eu, or to contact one of the
magazine editors directly. •
Happy reading!
CEO, Nets
Mette Kamsvåg
Mette Kamsvåg, CEO Nets
77
8. Words
Michael Juul Rugaard, Nets
image
Getty images
The use and cost of
cash across Europe
Europe is anything but homogenous when it comes to the use of
cash and the digital alternatives to cash. However, clear patterns
are emerging from region to region, and for large parts of Europe,
cash will presumably continue to be king for many years to come.
S
wedenwasthefirstcountryinEuropetotake
the progressive technological step towards
issuing bank notes. That was in 1661. Today,
Sweden is still at the cutting edge, but this
time as the European country that uses the least
cash – at least, according to the report The social and
private costs of retail payment instruments1*
(2012)
by the European Central Bank (ECB), which looked
at the costs and popularity of a range of payment
methods in 13 selected EU Member States.
Significant differences
In its report, the ECB asserts: “On average, cash
is still the most frequently used retail payment
instrument.” Evidently, cash accounts for as much
as 69% of payments in the 13 selected countries (for
all EU Member States, the figure is 65%), but this
masks significant differences between the countries,
with a distinct tendency for cash to be much more
prevalent in countries in southern and eastern
Europe than countries in northern Europe.
At just 26.64% cash payments, Sweden has made
the most progress towards replacing cash with other
paymentmethods.Denmarkcomessecondat34.85%,
and Finland comes a close third at 38.82%. At the
opposite end of the spectrum, the keenest users of
cash are found in Greece, where as many as 94.99%
of the country’s payments are made using notes and
coins, Romania at 94.88%, Italy at 82.66% and Spain
at 77.86%. As regards the use of payment cards,
Denmark came out on top in the study at 44.03%,
with Sweden in second place. Romania is at the
bottom with just 1.54% card payments.
low decrease
even in northern Europe
Although the use of cash is considerably lower
in the north than in the south and east, the amount
of cash in circulation is not significantly decreas-
ing even in northern Europe – if at all. In a new
study, Sweden’s central bank, Riksbanken, compared
cash trends in the three Scandinavian countries
– Sweden, Norway and Denmark – from 2007
to 2012, and although the value of cash relative
to GDP has decreased for all three countries (by
7.7% in Denmark, 16.7% in Norway and 26.8% in
Sweden), “Sweden is the only country to show a
distinct reduction in the nominal value of cash in
circulation. The reduction in the other countries
is related to the fact that growth in the amount of
cash in circulation is lower than growth in GDP.”2
Costs follow the same pattern
Looking at the distribution of the social costs of
cash payments versus card payments in the various
countries and regions of Europe, there, too, are
significant differences between northern Europe and
the southern and eastern regions. In the countries
of southern and eastern Europe, which are currently
massively dominated by cash payments, the price
of cash payments is relatively low, while the cost
per card payment is considerably higher. The exact
* Please find notes for this article at p. 74
8
Digital values
9. opposite is the case in the most northerly countries
with large numbers of card payments, where social
costs per cash payment are higher than the cost
per card payment. The ECB concludes its report
as follows with regard to the striking differences
across Europe:
“Due to relatively high usage, the cost of cash
is nearly half of the total social costs. On average,
cash payments show the lowest unit costs, followed
closely by debit card payments. However, in some
countries, cash does not always yield the lowest unit
costs. In fact, in more than one-third of the sample
countries, debit card transactions have lower unit
costs than do cash transactions.”3
The Riksbanken report compared the three
Scandinavian countries with Italy and Hungary, and
a very clear picture emerges here, despite the fact
that card costs include both debit
cards and credit cards (Figure 1).
A spLIt conclusion
The conclusion, then, has to
be that Europe is anything but
homogenous when it comes to
the use of cash.
On the one hand, the reality today in a number
of countries remains that “cash is king”. Despite
the potential for reductions in the costs to society
by way of converting cash payments into digital
payments in these countries, the tipping point for
favouring digital payments still remains a long
way off in the future. Even today, they are hugely
dependent on cash, and digital payments remain
a long way from the critical mass needed to bring
the costs per digital payment down below the cost
per cash payment.
On the other hand, for a number of countries in
northern Europe, further investment via digitisation
would seem to make sense in socio-economic terms
in order to capitalise on the fact that digital payments
now cost less than cash payments. •
figure 1: Social costs of cash and cards 2007 2009 ECB 2009
Norway Denmark Italy Sweden Hungary Lowest Highest Average
Cash
Socio-economic cost (SEK millions) 4,248 8,260 83,900 8,592 7,911
Proportion of GNP (%) 0.15 0.38 0.52 0.28 0.80 0.49
Socio-economic unit cost (SEK) 8.59 10.50 3.50 8.32 2.79 1.38 8.32 4.35
Cards, total*
Socio-economic cost (SEK millions) 6,513 5,166 17,800 8,749 1,886
Proportion of GNP (%) 0.23 0.24 0.11 0.28 0.19 0.21
Socio-economic unit cost (SEK) 7.21 5.89 12.59 5.55 10.78 2.34 85.70 14.23
* Includes card payments at the point of sale and for distance selling using debit and credit cards.
Sources: Banca d’Italia (2012), Nationalbanken (the Bank of Denmark) (2012), Gresvik and Haare (2009), Schmiedel et al. (2012),
Segendorf and Jansson (2012) and Turjån et al., (2011)
Total socio-economic costs4
of
payments for the 13 countries are
assessed in the ECB report as being
EUR 45 billion – corresponding to EUR
130 billion for all EU Member States or
1% of total GDP in the EU.5
9
10. Words
Niklas Arvidsson, Associate Professor
The consumer
paradox of cash and
the Scandinavian
opportunity
12
10
8
6
4
2
0
120
100
80
60
40
20
0
1950 1960 1970 1980 1990 2000 2010
Share of GDP (%) Nominl value (Billion SEK)
Source: Riksbanken
Figure 1. Value of cash in circulation in Sweden, 1950–2012
10
Digital values
11. C
ash payments have
been decreasing con-
stantly in Sweden in
recentdecadesandare
expected by many to continue
decreasing as card payments
and also mobile payments gain
groundasattractiveservices.Since
2009 we have seen an interesting
development as the gross value of
cash in circulation denominated
in SEK actually decreased for the
first time since 1950. The value of
cash in relation to GDP in Sweden
had been decreasing for a long
time, but now we also saw a decrease in actual
gross value (Figure 1).
But the low use of cash is somewhat unique to
Sweden and the other Nordic countries. In 2011,
the value of cash in circulation in relation to GDP
was 2.4% for Norway, 2.7% for Sweden and 3.5%
for Denmark, which can be compared to 7.1% for
the USA and 9.4% for the entire European Union in
2010. Looking at market shares of retail payments,
we see that the number of cash payments is low in
the Nordic countries (figure 2). The Nordic countries
are among the most cashless societies in the world.
It is clear that consumers in Sweden are favouring
card payments over cash payments in most situations
when these two alternatives compete. Given that,
it seems plausible that consumers would not be
concerned if cash disappeared and a more or less
cashless society was realised. But do consumers’
ideas harmonise with their actions? Do they “walk
the talk”?
To actually be able to answer such questions, I
participated in a recent study in collaboration with
Insight Intelligence, Sigma, Västtrafik and .SE. We
designed a survey and engaged SIFO to conduct
telephone interviews with a sample of 1,000 Swedish
consumers aged 15 and over who constituted a
representative sample of the Swedish population
in August 2013. The results were intriguing.
The walk
The consumers’ use of cash
illustrates the data from the
Riksbank (Sweden’s central
bank) that was presented above.
Around 64% of the population
use cash every week, and it is
used primarily in situations where
there are few alternatives to cash,
such as paying a friend, making
payments at temporary markets,
small purchases from smaller
merchants and paying for pur-
chases made from sellers coming
to your house. Not surprisingly,
this involves smaller amounts. Card payments were
used more frequently than cash – 83% used card
payments every week – and were used in situations
such as e-commerce, at restaurants, for parking,
at museums and for public transportation tickets.
Thus, consumers use cash but not as much as they
use card payments. No news here. So what was the
interesting part, you may wonder. Here it comes.
The talk
Two-thirds of the respondents – 67% – say that
cash is a “human right”!
There is a strong emotional connection to cash
among Swedish consumers that does not match
their behaviour. They do not “walk the talk” and
this is an interesting paradox. Even if people – in
general – do not seem to be dependent on cash
transactions, having it is still considered a human
right. Another question in the survey gives a hint
as to why this is the case. More than a third of the
respondents – 39% – believe we will never see a
cashless society in Sweden and about a quarter of
these – i.e. around 9% of all the respondents – argue
that this is because cash is such a deep-rooted tradi-
tion that it will never go away. And they have a point.
Sweden has had coins for 1,000 years and banknotes
sincethemid-1600swhenJohanPalmstruchreceived
the King’s permission to start a bank that issued ▶
Niklas
Arvidsson
11
Cashless society
12. 0 10 20 30 40 50
Danmark
Estonia
Finland
Greece
Hungary
Ireland
Italy
Latvia
Netherlands
Portugal
Romania
Spain
Sweden
CARDS
0 20 40 60 80 100
Danmark
Estonia
Finland
Greece
Hungary
Ireland
Italy
Latvia
Netherlands
Portugal
Romania
Spain
Sweden
CASH
FIGURE 2:
MARKET SHARE IN % OF RETAIL PAYMENT INSTRUMENTS
PER COUNTRY IN TERMS OF VOLUME
13. Sources: ECB Statical Date Warehouse and European System of Centralbanks ▶
0 5 10 15 20 25 30
Danmark
Estonia
Finland
Greece
Hungary
Ireland
Italy
Latvia
Netherlands
Portugal
Romania
Spain
Sweden
CREDIT TRANSFERS
0 3 6 9 12 15
Danmark
Estonia
Finland
Greece
Hungary
Ireland
Italy
Latvia
Netherlands
Portugal
Romania
Spain
Sweden
DIRECT DEBITS
0 1 2 3 4 5
CHEQUES
Estonia
Finland
Greece
Hungary
Ireland
Italy
Latvia
Netherlands
Portugal
Romania
Spain
Sweden
Danmark
0 3 6 9 12 15
OTHER
Danmark
Estonia
Finland
Greece
Hungary
Ireland
Italy
Latvia
Netherlands
Portugal
Romania
Spain
Sweden
Danmark
Estonia
Finland
Greece
Hungary
Ireland
Italy
Latvia
Netherlands
Portugal
Romania
Spain
Sweden
14. banknotes. That bank – Stockholm Banco – went
bankrupt in 1668, was taken over by the state, and
became what is known today as the Riksbank. The
idea of cash is strong!
A cashless society?
Can Sweden become a 100% cashless society?
Well, theoretically it could, as the number of elec-
tronic payment services that can substitute for
cash transactions is increasing by the minute. If
consumers, merchants, banks, telecom operators
and other stakeholders all move in this direction,
it could happen. We can at least imagine a society
where cash payments are reduced to a minimum.
The study showed that 45% of the respondents
believe Sweden will be a cashless society in 20 years.
But there is a catch. There is always a catch. Or
rather, several.
First and foremost, the law states that cash pay-
ments are legal tender and must be accepted as a
payment method. Even if merchants are allowed to
state that they do not accept cash, public organisa-
tions and banks must accept cash. A cashless society
needs a political decision that cash is no longer
allowed. In asking whether that could happen,
we first wonder when such a decision could be
made? Well, Sweden is just about to introduce new
notes and coins and the old ones have been around
for 30 years. If the new ones have the same longevity
– which primarily is decided by the risk of counterfeit
money and the quality of the notes and coins – we
can expect politicians will have to make a decision
to introduce the next version of notes and coins in
around 20–25 years from now. That is sometime
in the period 2033–2038. Will they say yes or no
to another round of notes and coins then? Who
knows? But what politician will argue that cash
should no longer be a legal payment method when
67% of the population see cash as a human right?
Making Sweden cashless is not a political stance
that would win an election today, that’s for sure.
And this discussion is, of course, based on the
assumptionthatSwedenstillhasthegoodoldSwedish
Krona. If it has been replaced by the Euro in 2033,
we can be certain that Sweden will have cash even
after 2045. As we know, the Eurozone is much more
in favour of cash than the Nordic countries and it
is a daunting task to convince all the countries and
all the consumers in the Euro area to disallow cash.
Finland is consequently more likely to be stuck
with – or (depending on your own view) fortunate
enough to have – cash than Sweden, Norway and
Denmark 30 years from now.
Then we have another catch. Will consumers,
merchants, banks, telecom operators and other
stakeholders all move in this direction? We have
already seen that even if consumers do not use cash,
they want it. And of course some consumers do not
access the advanced payment services. There are
consumers without bank accounts, without debit
and credit cards and without mobile phones. They
must also be able to make payments if we are to have
a cashless society. This is an important challenge.
What about the other actors? Well, this is where
the interesting strategic game is being played now –
right in front of our eyes. Banks are launching their
versions of payment services that may substitute
for cash. Card scheme operators have their versions
and mobile network operators have theirs. And the
challengers, innovators and invaders – whatever you
prefer to call them – have their versions. Even if
most of these want to see cash replaced by electronic
payments, they all have their own idea of how this
should happen. And sometimes they collaborate, but
sometimes they compete. This is, of course, exactly
how it should be in a market economy characterised
by competition, but it constitutes a transition chal-
lenge. How will interoperability – the most critical
component in a payment system – be realised in a
situation where head-to-head competition to win
the largest number of consumers and merchants via
new and innovative services is a reality? Perhaps we
will see a period of low interoperability in the new
services and a large number of providers, followed
by a shakeout and increasing interoperability. Not
unlikely.
Can we hazard a guess as to how this will happen?
Well, guesses usually prove to be wrong. One can
make some observations, though. The card schemes
are already supplying close to global interoperability,
and if the new services rest on these schemes, the
interoperability challenge will be easier to deal
14
Digital values
15. with. But this would also mean that the scheme
providers will continue to dominate the payment
industry, which is something regulators in Europe
do not favour. The new Payment Services Directive
takes a strong stance against the level of card fees
and it is in favour of new actors to challenge the
incumbents. Politicians are likely to continue their
regulatory efforts to drive down fees in the payment
system if card schemes continue to dominate the
scene. And, as in all situations where some players
are strong, there will be new ones wanting to enter
the scene. Some will be new and small, but some will
be big and strong in other industries, like telecom
operators or social media companies. We will see
more intense competition in the payment industry,
but an even more interesting question – to me,
at least – is: in which areas and how we will see
friendly collaboration among peers and others,
and in which areas we will see intense competition
between peers and others?
To achieve a good outcome from this develop-
ment, both those who need payment services to sell
their products and services and consumers wanting
to buy those products and services need to be critical
and make strong demands concerning what the
payment services should look like. Research shows
thatcriticalcustomersconstituteacriticalcomponent
if innovation leading to sustainable business models
is to be realised. In addition, supervisory agents in
the financial markets must assist them.
So, am I a pessimist? No, I wouldn’t say so.
Even if the Scandinavian markets are small,
there is strong innovative capability in firms and
entrepreneurs – as seen in the large number of
innovativecompaniescomingfromtheScandinavian
countries – and the companies often aim to provide
solutions that can be used throughout Europe. And
– why not? – all over the world. The potential for
this to happen is great. I believe we are actually
seeing what people in the future will call the birth
of the Scandinavian payment cluster right in front
of our eyes. This is more interesting than whether
or not cash is eliminated (even if the potential
problems with a cashless society must be dealt with
appropriately). So, the innovation show has started.
Play, watch and enjoy! •
15
Cashless society
16. He listens to Beethoven, goes kayaking, drives an electric car, in-
vests in renewable energy, advocates digitisation and wants to see
cash consigned to the scrapheap. And he’s sold 370 million records
and has just opened his own – cashless! – museum.
His name is Björn Ulvaeus, one of the two Bs from the legendary
1970s pop group ABBA.
Words
Michael Juul Rugaard,
Nets
Images
Claudio Bresciani
Money, Money, Money
– but not in cash
Björn Ulvaeus
16
17. O
ne afternoon with towering skies, I meet
Björn Ulvaeus for lunch at Godthem
restaurant, situated in a 19th-century
wooden villa surrounded by tall decidu-
ous trees just five minutes’ walk from the new ABBA
The Museum. I’ve just come from the museum,
where I stood in the spotlights on a darkened stage
and sang “Dancing Queen” from 1976 together with
four life-like ABBA avatars, and as I shake hands
with the real-life Björn, I still have the melody and
the lines “You can dance, you can jive, having the
time of your life” running through my head.
Both the ABBA museum and the restaurant are
located on the recreational island of Djurgården,
close to the centre of Stockholm. We order home-
made Swedish blood pudding with roast pork and
lingonberries, which happens to be the menu of
the day, and which Björn says he hasn’t had for ten
years. He smiles and fills his glass with sugar-free
cola, and before I can manage to formulate my first
question, he takes charge of the interview …
Björn Ulvaeus: I’m glad you wanted to talk about
this matter of the cashless society. I wrote an article
for the Norwegian newspaper Verdens Gang about
the subject a few years ago because I believe Sweden
– and Denmark and Norway too – would be the
ideal societies to get it all started, as we have small
currencies that are only used within our countries’
borders. In the meantime, I’ve met Anders Borg
[Sweden’s Minister of Finance. Ed.] a few times,
but I’ve never managed to ask him what’s holding
us back. Next time, I’ll remember to ask him. I’ve
asked other people, however, including a number
of bank directors, and none of them has really
been able to explain to me why we don’t just go all
the way and eliminate cash, which would make it
impossible for the country’s burglars to get away
with stolen computers, TVs, jewellery and so on
within Sweden’s borders. What do you think?
Michael Juul Rugaard: A centuries-old tradition
of cash, perhaps? Force of habit; uncertainty
about the alternatives?
BU: Yes, but if we sort of expose those habits and
look more closely at them, they’re quite easy to
eliminate.IfyouaskSwedeswhosaynotoeliminating
cash, as a gut reaction, to say what exactly they
absolutely must use cash for in Sweden today, well,
they don’t really know. So perhaps the answer is that
if children are going to buy ice cream from a kiosk,
it’s practical for them to use notes and coins? But
this can be dealt with using a cash card instead, and
ultimately, when you get down to the nitty-gritty,
cash isn’t absolutely essential anywhere at all. So
on closer inspection, what people thought were
good reasons for retaining cash don’t really exist.
MJR: But apart from tradition, some people resist
because notes and coins are perceived as more
tangiblethandigitalpayments,whichmayappear
more abstract, don’t you think?
BU: Maybe, but what could be more abstract than
transferring a value to a piece of paper – a bank
note? A symbol of value – that’s rather abstract,
isn’t it? That’s every bit as abstract as reading a
text message on your mobile phone that says an
amount has been deducted from your account for
a particular purchase in a particular shop.
It began with
a burglary
MJR:Butlet’sgobackastep: Howdidyouactually
start thinking about this matter of a cashless
society?
BU: The reason was that my son had a number of
burglaries in his flat, within a short space of time.
His computer, stereo, branded clothing and things
like that were stolen – things that the thieves could
immediately take to their fences and convert into
cash. And that got me wondering what they would
have done if cash didn’t exist. That was the start, and
I enjoy analysing things that puzzle me, so I wrote
this article where I asked the question: what would
burglars do in a cashless society? And it generated
a bit of debate. ▶
17
Cashless society
18. MJR: But some would no doubt say that, for your
plan to work, the whole world would have to be
cashless, because otherwise the thief could just
drive his loot out of Sweden and convert it into
cash elsewhere?
BU: Yes, but that would mean he’d have to get out
of Sweden, and he’d have to explain why he had
received money in his account in Sweden, because
he wouldn’t be able to use euros or any other foreign
currency in Sweden, if Sweden had gone cashless. So,
what could he do other than have a bank account,
with traceable transactions?
MJR: But some people would object that if you
take away cash, criminals would just come up
with something else – maybe they’d start paying
in gold instead?
BU: But can you imagine how trading in gold would
work between the fence and the burglar? And would
the gold then be used to buy milk and bread or
whatever? Ha, ha… how could that possibly be
practical? It just wouldn’t work…
MJR:Ormaybetheycouldpayinvirtualcurrencies
like Bitcoins?
BU: Yes, but the burglar is a consumer like you
and me, and he might have a family and all sorts of
things and lead a normal everyday life like the rest
of us, and you can’t lead a normal life in Stockholm
if you have to base it on Bitcoins. You can’t buy a
train or bus ticket with Bitcoins or go shopping in
the supermarket. It just wouldn’t work in practice …
forget it!
MJR:Ihadachatwiththetaxidriveraboutcashless
society on the way here today, and his concern –
which many others no doubt share – was that this
is another step towards a Big Brother surveillance
society. What do you think about that concern?
BU:Butwe’realreadyasurveillance
society, and removing what’s left
of the cash from society wouldn’t
make any difference, unless you’re
a criminal and you’re trying to
conceal your illegal activities. It’s
just an irrational feeling that can
easily be punctured if you’re open
to reason.
Anonymity
is hyped
MJR:Butaren’tpeoplerighttobe
concernedthatgoingdigital–as
has been happening in many
areas in recent years, especially in the Nordic
Region – means we become less free as citizens,
and that our chance to be private and anonymous
is being taken away from us?
BU: I’ve given that a lot of thought, and I’ve come
to the conclusion that it doesn’t matter at all if
people see me when I’m walking around the streets
of Stockholm, and for people to know who I am. It
doesn’t matter to me, and I think it’s OK to live in
such an open society. And basically, it’s probably
unavoidable. I picture the whole Earth as a single
gigantic network where everyone is ultimately linked
to a single enormous brain.
Björn
Ulvaeus
18
Digital values
19. MJR: As many of us already are, in part, via the
Internet…
BU: Yes, in many ways we are already, and we are
becoming more and more linked, and it really doesn’t
bother me. I mean, what would I use my anonymity
for anyway?
MJR: And you’re saying that even though you’ve
been famous in most parts of the world for years
and years…
BU: Yes, of course, I’m a bit different in this respect,
but as long as there are places I can retreat to for a
bit of peace and quiet, that’s fine by me.
MJR: And is that possible?
BU: Yes, it’s entirely possible, and I don’t see how
that could be changed. No one is allowed to install
cameras in my house, so it’s enough for me to have
the freedom to be myself in my own home. When
I’m walking around in public, I don’t have a problem
with being visible. And when I’m paddling my
kayak in the Swedish archipelago, I feel a great sense
of freedom, and I don’t mind if there’s a satellite
somewhere up there watching. So the anonymity
you’re talking about in defence of cash – it’s of no
value to me. I don’t think that’s a valid argument
for maintaining the cash system.
MJR: But let’s assume you were living in a country
that’s not democratic, and where you didn’t have
yourconstitutionalrightsandfreedoms:wouldn’t
makingallpaymentstraceablegivethoseinpower
the upper hand against their citizens?
BU: Actually, I think countries with under-developed
democracies could benefit from eliminating cash
because that would be an effective way of combating
corruption. Corruption holds democracy hostage,
and it would be great to be able to dismantle cor-
ruption by ensuring that funds earmarked for a
particular purpose were in fact actually used for that
purpose and didn’t disappear via corrupt channels.
If all payments were traceable, things like passing
money under the table just wouldn’t work anymore.
That’s the sort of thing the Bill & Melinda Gates
Foundation has realised when they advocate micro-
payments and direct digital payments in the Third
World. As long as you have a mobile phone, you
can get around the dictators and corrupt officials.
MJR: A while ago, a survey indicated that 45% of
Swedes believe Sweden will go cashless within
20 years. What do you make of that?
BU: I think those answers must be due to the way the
question was formulated. In other words: “Do you
believe Sweden will be cashless in 20 years’ time?”
I would expect most people to say it will happen
within five years. But I think 45% is rather low.
MJR: Presumably that also means there are still
quite a lot of Swedes today who don’t think
Sweden will ever go cashless?
BU: Yes, but it’s a matter of teaching and information.
That information has to come from somewhere,
and that’s why we’re sitting here today. You have
to inform people and make them reflect on the
fact that there’s really no reason to hold onto the
payment system we have today. In practice, they’re
already letting go, as they choose to use alternatives
to cash more and more.
MJR:Sowewanttoholdontosomethingalthough
we don’t really know why, and in practice we’re
rejecting the very thing we say we want to keep?
BU: Yes, exactly. You’d hope the national banks would
take the lead, so it’s completely incomprehensible
why Sweden’s central bank, Riksbanken, has decided
to issue a new series of notes from 2015. Who needs
a 500 or 1000 kroner note? Only those who have
something to hide. So we could start by taking the
high-denomination notes out of circulation.
MJR: The Serious Organised Crime Agency in the
UK demonstrated a few years ago that 90% of
all 500 euro notes in the UK were in the hands
of organised crime…
BU: Yes…that’ssomething I’d liketo askthe governor
of Riksbanken directly: Why are you printing 1000
kroner notes when none of us need them? ▶
19
Cashless society
20. Yes to digitisation;
no to nostalgia
MJR: If you were to try to describe what’s hap-
pened since 1976, when no one discussed the
future of notes and coins, and you wrote the
hit song “Money, Money, Money” – what sort
of development and momentum have we seen
in society since then?
BU: Well, let me reveal that the song “Money,
Money, Money” has absolutely nothing to do with
money. It was just a sound I heard in my head.
I had different lyrics in mind at first, but they didn’t
sound right, and then the sound of “money, money,
money…” came to mind, so I had to write the lyrics
on that subject. But the sound came first, and there
was absolutely no connection at that time with any
thoughts of a cashless society.
But apart from that, in answer to your question:
there has been a massive shift to digitisation in
society since the 1970s.
MJR: And what do you mean by digitisation?
BU: I mean the transition from analogue to the digits
0 and 1. And I experienced this transition in a very
concrete way in the recording studio. In the early
years, we recorded on analogue tape recorders, and
we had a limited number of channels to work with.
As I remember it, we recorded analogue up to and
includingthelastLPwithABBA,butwhenweworked
with Chess, we had bought digital equipment, so
that’s when I had front-row seats to a very definite
technological shift. But it happened in all sorts of
areas of society in those years, and when you look
back on it now, it’s been a revolution.
MJR: Have you always embraced digitisation, or
are you also critical of this development?
BU: No, I’ve always embraced development and
change, because when you can see it’s an improve-
ment, there’s no need to get caught up with nostalgia.
I don’t feel the least bit nostalgic about vinyl records,
for example. I think it’s brilliant that music is so
much more accessible today than it was before, via
cyberspace. When you write music yourself, it’s as
if you’re plucking ideas from a Platonic universe of
ideas. Once a melody comes to you, you immediately
feel it’s just so right that you think it must have
existed out there somewhere beforehand, in this
universe of ideas, or in cyberspace. And it’s rather
like that for all of us today, now that all music is
accessible via online services and streaming, etc.
MJR: So you welcome services like Spotify and
WiMP?
BU: Yes, definitely.
MJR: But isn’t there any downside to digitisation?
BU: Nope…
MJR: No…?
BU: I don’t see any downside to digitisation. It makes
everything easier and more efficient.
MJR:Butwhataboutolderpeopleandothergroups
of people who have difficulty using computers
and online banking and smartphone, etc.?
BU: Well, of course, we have to think of older people
or people with special needs, but that doesn’t prevent
us from reaping the benefits of digitisation at the
same time. To me, these are two different things,
but obviously we mustn’t leave people behind if they
can’t keep up with developments; we need to help
them, of course. It’s clear, too, that some groups in
society may be concerned about the implications
of doing away with cash because they feel more
confident using cash than they do with digital pay-
ment solutions, and they’re worried about how
they would cope with new technologies, such as
mobile payments.
That’s why it’s vitally important to develop the
new payment solutions intelligently so that no one is
excluded; on the contrary, we need to make it easier
for groups who are already struggling in various
ways. These could be disabled people, or people with
special needs, and technological solutions could
be designed that are easy for them to use, too. ▶
20
Digital values
22. MJR: So the bottom line is that there’s no use
standing still or going back?
BU: Yes, and that doesn’t only apply to payments,
but to new technologies in general. I’m fascinated by
what’s been happening about energy these days, with
solar power, geothermal energy and hydro-electric
power. I’m involved in a project in my old home
districtofVästervik,wherewe’rebuildingahotel,flats
and restaurants completely from scratch, and they
will be located close to the sea. I’m very interested
in developments in things like solar power and how
we could harness the latest technologies for our
project. And that all links in with digitisation too.
The other day, I bought the new Tesla sedan,
and I think electric cars are the way forward. I’m
not at all nostalgic about petrol stations or tankers
on the roads. There’s nothing positive about those,
and I look forward to seeing them disappear and
being replaced by cleaner technologies.
I think some people are mentally predisposed
for a future-oriented, non-nostalgic view of life
and the world, and I think I’m one of them. I’ve
never looked back longingly to the time when I
was on stage with ABBA, and thought how nice it
was to be there, or wished I could turn the clock
back – definitely not.
MJR: But how can you say that now that you’ve
got your own museum? Not many people get to
have a museum about themselves – and certainly
not in their own lifetime! Don’t you get nostalgic
when you see the whole ABBA story unfolding
before your very eyes?
BU: No! And that was actually one of the reasons
why I was able to get to grips with the project and
help to construct the museum. I regard myself
today as a different person from the guy in the
silly costumes and platform boots, and the ABBA
era feels like a long, long time ago. So today I’m
able to tell the story of that time without a hint of
nostalgia, and if I hadn’t been able to do that, it
would have seemed very artificial and narcissistic
to build a museum about yourself.
MJR: But don’t you feel any tenderness towards
the guy in the platform boots?
BU: Yes, I do, in a way – great tenderness, but not
nostalgia.
MJR: When you chose to be actively involved in
this ABBA The Museum project, you also made
thedecisionthatitwouldbeacashlessmuseum…
BU: Yes, and a lot of people were amazed and asked
if that was really a good idea, because it would
be sure to lead to lots of problems. Some people
asked: “Do you really want to frighten away all
the Russians with their bundles of notes?”
But the truth is that we haven’t had any
problems, because it turns out that most
tourists actually have a payment card on
them, even if they start off wanting to pay
cash. And if that is a problem, people can
always go into the restaurant next door
and buy a cash card there. So we’ve left the
back door open, in a way …
Unacceptable black
economy
MJR: As a musician yourself and a firm advocate
of a cashless Sweden, you must have given some
thoughttowhatthemanystreetmusicianswould
do in a cashless society if they could no longer
earn their living just by passing the hat around?
BU: Yes, exactly – what should we do about them? If
society went cashless tomorrow, it would be difficult,
but I’m sure the problem will resolve itself in the
next few years with the many new payment systems
on the way for smartphones and tablets, etc.
Actual begging is worse; that would obviously
be affected when cash is eliminated, but I think we
If all payments were traceable,
things like passing money
under the table just wouldn’t
work anymore.
22
Digital values
23. have to acknowledge that the problem of begging
isn’t about payments and payment technologies.
That’s on a different level; it’s a social problem, and
the way to eliminate it is to remove the causes of
begging, not by developing payment technology. So
begging doesn’t carry any weight as an argument
against eliminating cash either, in the same way
that the right to moonlight doesn’t.
MJR: But cash is very important when it comes
to moonlighting, isn’t it? And shouldn’t people
be able to do a bit of work on the side?
BU: Well, we’re assuming, of course, that all people
are honest and pay their taxes, and so on. So the
black economy, whether it’s “only” moonlighting or
crime as such, can’t possibly be part of the argument
for retaining cash.
But it is an important element, of course, when
we talk about the benefits of removing cash – that’s
for sure. We need to develop solutions capable
of ensuring that the revenues lost because of the
black economy are returned to the treasury for the
benefit of everyone in society. And removing cash
can only help to accelerate that movement, in my
opinion. Marginalised people in society will benefit
the most from the additional resources that would
be available if the black economy was reduced.
MJR: If we give up notes and coins, aren’t we also
givingtoomuchpowertothemajorcardorganisa-
tions, for example, like Visa and MasterCard?
BU: I reckon that if they don’t self-regulate, we’ll have
to use legislation to ensure that they don’t charge
excessive fees, etc., and that’s already happening
now. But I believe competition will automatically
make sure that those that charge excessive fees will
fall by the wayside. The same applies to banks, of
course. Banks and their charges are in the spotlight
more than ever, and there are some organisations
keeping a sharp eye on things like that; there’s also
a lot of political awareness here.
MJR:IfyouweretodescribeyourvisionforSweden,
how would it look?
BU: It’s a more honest, more transparent Sweden,
whereconditionsaretoughfortheblackeconomy.I’m
not saying we can eliminate all crime, and certainly
not the sort of crime that goes on in the higher
echelons, and that typically doesn’t even involve
cash, but at street level, removing cash would make
a difference.
MJR: Shouldn’t there be more cooperation on
this at Nordic level?
BU: Yes, definitely. Our vision should be for a cash-
less Scandinavia or a cashless Nordic Region. The
Nordic Region needs to lead the way here, too, as
we have done in many other areas. That’s my vision.
It’s worth fighting for; it’s a matter of creating a
better society and about setting a good example
to the world.
MJR: One last question, and it has absolutely
nothing to do with notes and coins: When you
want a great musical experience, what do you
listen to?
BU: When I settle down to listen to music actively,
it’s usually a Beethoven symphony. It could be any
of them, but my favourite symphonies are his first
two. I often go for Mozart, too. But not ABBA …
ha, ha… •
23
Cashless society
27. The mechanics of
consumer payments
The need for exchanging valuables has always
been an inherent part of human interaction. With
the expansion of civilisations the concept of payment
and the complexity and volume of payments have
grown – similar to the spiral-shaped shell of the
prehistoric ammonites – constantly evolving and
adapting to the growth and building the complexity
needed to fit for purpose.
Payments have always been about receiving
a service or an asset, and giving something back
in exchange, but as civilisations evolved, simple
bartering was insufficient and it became necessary
to define value in a more abstract way, and to agree
on a common reference in which we could trust, and
to which any asset could be related. The invention of
money was indeed brilliant – a structure enabling
us to use the same method and instrument for
payment, whatever item one wanted to purchase.
Building layers
It is important to realise that today’s payments
rest on the simple exchange of valuables, but also
to accept the fact that the structures we have built,
since the first monetary systems were developed,
constantly increase in complexity to fit for purpose.
Trust remains a pivotal factor, and a necessary basis
for all implementations of payments systems.
Factors such as the need for security, accessibility
and transaction speed have driven the development
of payment infrastructures and introduced multiple
peripheral solutions. Furthermore alongside with
these developments complex regulation layers have
been introduced to govern the ecosystem and ensure
the trustworthiness.
Banking has made it possible to combine safe
keeping with high accessibility, and has centralised
the transfer of funds to deal with security issues.
Modern technical achievements have enabled the
prevalence of global infrastructures such as VISA/
MasterCard, providing access to funds and facilitat-
ing transactions directly at the point-of-purchase.
In our present consumption-driven economy
– based on growth and supply/demand in a global
marketplace – the demand for speed, global acces-
sibility and convenience have given new players
outside the traditional financial infrastructures an ▶
27
Cashless society
28. opportunity to establish new products and services,
on the surface offering convenience and ease of use,
but still adding layers to the evolution spiral and
increasingthecomplexityandspanofthevaluechain.
At the same time, every single payment layer
constantly needs to be adapted to meet current
requirements in order to maintain validity and
usability–thus,thedesignofbanknotesisrenewedto
avoid counterfeiting, identity schemes are introduced
to ensure authenticity and encryption ensure that
transactions cannot be compromised – taking the
entire evolution spiral to a new level.
Payment superstructures
The rate at which new consumer payment
services is introduced is exponential. Before the
20th century, gold-based currencies in cash were
dominant, but from 1900 to 1950, the first develop-
ments of card payments took place. In the second
half of the 20th century, the adoption rate of card
based infrastructures grew dramatically, and the
creation of a world-wide network provided the
foundation for connecting local card schemes,
enabling world-wide use.
Today, rapidly growing e-commerce and use
of mobile devices (laptops, tablets, phablets and
smartphones), combined with the global reach of
major card schemes, has fostered a huge number of
innovative new ways to facilitate payments – BUT
the vast majority simply provide services built on
top of the globalised card infrastructure and do
not constitute new payment infrastructures OR
acceptance solutions by themselves. In essence, these
solutions only add to existing platforms, having
already established infrastructure as a prerequisite
for operating, but creating value for users e.g. by
freeing up valuable time to focus on commerce rather
than the less exciting payment part of the process.
So, what does this diversity mean for consumer
payments and commerce in general?
The answer is: less transparency - awareness
of the true funding source often gets obscured by
the layers built on top, which in general is accepted
due to increased convenience and purpose-built
functionality. The aim is often to lower payment
barriers enabling a smoother sales process, yet it
increases the disintermediation between the core
source of funds and the consumers’ perception in
the payment process.
As a result, a number of payment superstructures
have emerged, offering a different business model,
e.g. using prepaid as the means to facilitate “simpler”
payment experiences, and creating a consumer
perception of a parallel banking experience for
payments. Services allowing people to enrol a pay-
ment card, and create transactions using a proxy
(e.g. barcodes or RFID) are abundant, seemingly
creating a new payment method, yet in fact paying
tribute to the efficiency and market coverage of the
existing infrastructure.
For merchants, smarter, convenient, simpler and
value-add are attributes that attract - however, the
most important criteria for a payment solution to
be widely adopted by merchants is ubiquity. The
combination of innovation, standardisation and
certainty of user adoption across markets is a strong
investment rationale.
Adding value?
With the growth of digital services (online and
mobile), convenience seems to be one of the main
drivers of success. This feature is also a prerequisite
for user uptake in the first place. While consum-
ers have been increasingly well served in terms of
convenience, they have shown very little willingness
to pay for convenience directly.
There are, however, ways to motivate consumers
to pay for convenience in a more indirect manner.
Onewaycanbebyreducingthequalityoftheproduct
while increasing the convenience. Examples of this
can be seen when people switch to streaming music
services, where the convenience is higher but the
quality lower than music distributed on CDs. Within
financial services, it could be argued that some
products like e-money are of lower quality than
other electronic means of payment (less consumer
protection, less flexibility etc.), but offer a more
convenient user experience in certain settings - e.g.
at festivals, where participants have topped up a
“digital purse” to pay for beer and other expenses
within a limited area for a limited time.
Another way of paying for convenience is for the
consumer to pay in the new “alternative currency”
of information. The ability to exchange personal
28
Digital values
29. information for services has seen explosive growth
over the past years, with Google being the leader
of this kind of business model.
Theamountofinformationthattheusergenerates
and is able to share (knowingly or unknowingly) is
growing due to increased digitisation of services. This
is leading to more options offering higher quality
and greater convenience and hence an increase in
the total value of the service, all fuelled by the added
value of the information generated. But while this
leverages the total value of the growing ecosystem,
it is important to remember that the original assets
– the money in the account – remain the same.
That said – the consumer might find he or she
derives additional benefits besides convenience
through the digital channels when use and/or
information are rewarded with special offers and
discounts.
The question is – how much value is it possible to
generate on top of the basic commercial transaction
of exchanging money for goods? Will it always
be a win–win situation where consumers benefit
from a high level of convenience, relevant offers
and attractive discounts while at the same time
giving sufficient benefit to the merchants or other
commercial entities for them to sponsor the new
layers and increased complexity in the ecosystem?
The financial sector should strive to ensure that
the development of the future payment solutions
combines the desire for convenience with value for
merchants while maintaining transparency of the
underlying assets.
A quantum leap may redefine the
basis for evolution
With the introduction of Internet commerce, the
world has witnessed an explosive development of
“digital payments” in the online universe – in part
as existing payment instruments and schemes have
been adapted to suit emerging needs, and in part
as overlay services have bridged the gap to the real
world and provided automated payments, invoicing
and other solutions.
With the introduction of online payments in
physical stores, where stored card information is
used via e.g. barcodes or facial recognition, we
experience the trend of payments going full circle,
merging into one single payment methodology
regardless of context. It can be anticipated that
regulatory adaptions will follow to align regulation
with reality and reduce the differences between
traditional “physical” payment instruments and
their online manifestations, further fuelling the
innovation engine.
The question is whether new payment solutions
will replace some of the current core elements such
as a bank account, cards or cash, or add functionality
on top. The increasingly outspoken market demand
for lower costs of payment acceptance, and the
intensified political debate regarding consumer
costs, indicates that we are reach-
ing a point of saturation beyond
which complexity and costs will
exceed the benefits of increased
efficiency.
As the main provider of pay-
ment instruments connected
to an account, banks are in a
unique position to protect their
role as the primary source for
consumer payments, enabling
their customers to pay directly
from an account. The build-up
to such a quantum leap is seen
across markets, where banks
provide the consumer with direct
and easy access to perform ▶
1900 1950 2000
Number of
payments options
Percentage
beyond local reach
The Internet-age surge in available payment
solutions has generated a large quantity of
services lacking the ubiquity of previous payment
instruments, creating a never-before-seen
diversity of payment options available – varying
from one market to the other.
(Not to scale, for illlustrative purpose only)
29
Cashless society
30. With the expansion of civilisations the concept of
payment and the complexity and volume of payments
have grown – similar to the spiral-shaped shell of
the prehistoric ammonites – constantly evolving and
adapting to the growth and building the complexity
needed to fit for purpose.
31. person-to-person payments from mobile devices,
with no need for a prepaid account, a card acceptance
device or a home banking solution.
For these services to cover the needs in a com-
mercial setting, cross-border connectivity and
standardised acceptance have to be in place. A
new representation of the payment core can emerge,
creating new opportunities for innovators to build
convenient superstructures, - and most likely also
significant challenges for others.
A keyword to consider is standards. Banks are
in a strong position to build on existing standards
for processing transactions, whatever infrastructure
is used. The necessary operational international
forums are in place to agree on new acceptance
standards, as is the legal competence needed to
ensure long-term compliance with legislation.
Empowering the consumer;
clearing the way to future
payments
No contender is on the brink of world domi-
nance – but some have created regimes within
which a stronghold is certainly present, although at
the cost of putting up walls to ensure control. The
walled gardens of the mobile platforms are proof
of how total control restricts ability to interact with
outside stakeholders, and issuers as well as solution
providers are forced to put a sign in the window
stating “available on any platform”.
Thus consumers have to make a choice, and they
cannot be certain that they will have the complete
set of options once they have made their choice – far
from ideal, and an open invitation to create a more
efficient setting for consumer payments.
Organising payment services into a wallet is one
step towards the desired end-state and in addition,
developing the wallet to operate across platforms
as well as to span physical and on-line commerce
will provide the commerce transparency that many
overlay services strive for. To release the wallet’s
potential for full-scale consumer benefit enabling
users to do more than card payments, standards
for interactions will have to be described - e.g.
redemption of points at any point of consumer
contact, validating digital identity or standardised
access to issue coupons to any wallet.
Furthermore, adding the ability to control other
items, and not only funds in the wallet, creates the
true foundation for digitising the mechanics of
payments, enabling a consumer to transfer non-
monetary valuables in a transaction.
The latest technical achievements allow for the
development of a mobile instance of the wallet
that will provide the platform for issuers to issue
cards directly to a mobile device, empowering their
customers to conduct commerce in any market
accepting contactless payments, and, in future
versions, to operate across physical and online
commerce domains as well as managing valuables.
A way of understanding the full potential of the
wallet is to see it as not only a container of instru-
ments and valuables but also a window to all the
different layers, allowing an issuer to provide access
not only to a bank account or payment card and
other bank-issued services but to any other service
relevant to the consumer e.g. loyalty cards, points,
coupons, digital identity and other public services.
Cashing out
– effects on cash in circulation
Having these payment capabilities right at your
fingertips together with the apparent increase in
digitised commerce will definitely simplify payments
in the future, and the number of situations, where
cash is needed will be fewer and fewer.
The banks’ innovative person-to-person solutions
are a clear example of how modern solutions provide
an equal alternative to exchanging cash, and the more
standardised and internationally available they get
the more these solutions will make cash obsolete.
For Merchants, the advantages of electronic
payments over cash will become increasingly evident,
as the potential of more intelligent value-adds get
released in the coming years.
The extent to which digitised payment solu-
tions will replace cash depend upon more than
just technology and smart payment instruments,
but as far as consumers are concerned, security,
convenience and globalised acceptance will be strong
drivers towards a cashless society. •
31
Cashless society
32. Replacing the leather wallet
With smartphones being an integrated part of
everyday life, it is only natural that commerce has
taken a firm hold in the use of these devices. As
smartphones gradually replace other devices like
watches, calculators, newspapers, game consoles, etc.,
it is an obvious vision that the smartphone should
also in time be able to replace the leather wallet.
As payments are perhaps the most defining
functionality of a wallet, this is where we have already
seen most services launched on mobile devices.
Most of these have been built as superstructures
upon existing payment systems, where the service
on the phone simply is an interface to another
payment instrument. The next generation of mobile
payments will reside on the phone or be tightly
coupled to the phone. This development taps into
the potential of integrating the smartphones into
the existing payment infrastructure.
The Nets
suite of mobile
services
WORDS
Jørn Degn Hansen &
Kristian Thure Sørensen, Nets
Nets is in the process of bringing to market a
suite of mobile services that will allow banks and
merchants to interact with consumers in new
ways without having to replace current processes
and systems. This will ensure the widest possible
reach as well as the flexibility requested by issuers
and consumers alike.
The mobile wallet will support a
wide array of content from loyalty
and membership services to other
types of financial services.
32
Digital values
33. The real new feature of the mobile wallet
compared to the physical wallet is not,
as the name suggests, that it is mobile,
but that it is connected.
Towards increased simplicity
It is important to note that the real new feature
of the mobile wallet compared to the physical wallet
is not, as the name suggests, that it is mobile, but
that it is connected. This allows for online access
to a series of other services and thus makes the
smartphone a part of the financial services infra-
structure. While the solutions are indeed complex
from a technological point of view, this integration
is actually a foundation for increased simplicity
since it allows for easier access to and management
of a consumer’s valuables.
Nets’ mobile wallet platform
At the centre of Nets’ mobile solutions suite is
the Mobile Wallet Platform. This platform allows
any issuer to design and brand a mobile wallet
that fits his/her needs. At the same time, the flex-
ibility of the platform allows any service provider
to launch services across different issuers’ wallets
(at the discretion of the individual wallet issuer),
thus giving the end-user the same experience as
with the leather wallet, where cards from a wide
range of providers happily coexist.
A variety of services
One of the initial services
delivered to the wallet will be
card-based payments through
mobile-issued payment cards
from the existing schemes that
tap into the existing acceptance
infrastructure. Furthermore, the
mobile wallet will support a wide
array of content from loyalty and
membership services to other types of financial
services. This solution brings the benefit of scale
and interoperability as well as providing the option
for true differentiation. •
33
Cashless society
34. The cashless
society is the
way ahead
Words
Torben E. Hoffmann Rosenstock, Chief Consultant
at the Danish Chamber of Commerce
image
The Daily Telegraph
Torben E.
Hoffmann Rosenstock
34
Digital values
34
35. Although many shops and customers like cash
payments, the Danish Chamber of Commerce
recommends that shops should be allowed to decide
for themselves whether they wish to accept cash or
only cards, going forward.
Many shops like accepting cash payments, and
in fact probably only a minority of shops would
consider it relevant to do away with cash as a means
of payment.
Too often, the cashless society is presented as
an either–or situation, but it is important to strike
a balance in this debate. There is thus no reason
to believe any change in the law would result in
cash-paying Denmark waking up to find most of
the retail trade no longer accepting cash.
People in the retail trade want to make money,
and for the vast majority, the combination of cash
andcardpaymentswillnodoubtbethepreferredway
for many years to come. But that does not preclude
paving the way for innovative new business models
that could help to brand Denmark as a pioneering
nation. However, this is contingent on our legislators
having the appetite to blaze new trails.
The Danish Chamber of Commerce welcomes
the notion of challenging conventional means of
payment with innovative new payment solutions
based on consumer trends and existing technological
facilities capable of supporting such a development.
Thetrendhereisclear:DanesmainlypaybyDankort.
Scarcely anyone will mourn the phasing out of
cheques these days. If we had had the same discus-
sion 20 years ago, the picture would presumably
have been very different. We must look ahead and
ensure there is always an incentive for developing
new and better solutions.
Cashless means better
security too
Today, in Denmark, only banks, unmanned
filling stations and vending machines are exempt
from the requirement to accept cash payments. For
security reasons, therefore, more and more banks
are choosing to reduce the number of branches
which accept cash.
Reducing the number of shop robberies would
benefit society. With this in mind, there is a sur-
prising lack of political will to consider legislation
permitting those shops which may deem carrying
cash too great a security risk to opt out of cash
altogether, as they can in Sweden.
Figures from CrimeStat, the retail trade’s crime
mapping portal, shows that in the vast majority of
cases, the robbers flee empty-handed or only gain
limited funds in a robbery. Even if shops follow
police advice to keep cash holdings to a minimum,
some shops are uncomfortable with having cash in
their tills knowing that robbers may be satisfied
with even a limited amount of funds.
Apartfromthesecurityaspect,itcanbeexpensive,
time consuming and might involve a lot of admin-
istrative hassle for shops to cash up and deposit the
cash in the bank’s night safe.
However, shops are not the only vulnerable
targets when it comes to carrying cash; the same
applies to ordinary people. Unlike those who prefer
to have ready cash in their pockets, credit card
holders benefit from an anti-fraud guarantee in
case of theft. •
35
Cashless society
36. Dansk
Supermarked
ready for
contactless
payments
The Danish retail chain Dansk Supermarked is preparing for a future without cash. The
first steps are the introduction of new terminals that will ultimately enable consumers to
pay using contactless cards and mobile phones.
D
enmark’s largest retailer, Dansk
Supermarked, has taken a major step
towards the supermarket of tomorrow.
As of 2014, all payment terminals in all
550 stores of the Danish chain will be contactless.
This involves 4,500 terminals altogether.
“Wearealreadybusyimplementingthenewterminals
throughout Denmark, and everything is progressing
according to plan. Stores that have already been
fitted with the new terminals report great customer
satisfaction, as customers find payments made using
the new devices are faster, even though they still
have to insert the chip into the terminal as yet,”
according to Alan Jensen, IT director of Dansk
Supermarked.
Words
Nina Faurby,
RelationsPeople
Images
Morten fauerby
Support for less cash
Further down the line, contactless terminals will
also enable the customer to complete a transaction
just by placing a contactless payment card or a mobile
phone on the terminal. Although no contactless pay-
ment cards or payment tags for mobile phones have
been issued in Denmark as yet, Dansk Supermarked
already has high expectations for a future involving
less cash. According to Alan Jensen, contactless
terminals will benefit customers, employees and
merchants alike:
“We are extremely interested in creating cashless
supermarkets, and this is one step in that direction,
becauseweexpectmorepaymentsinvolvingsmallsums
to switch to contactless cards and mobile phones. ▶
36
Digital values
37. About Dansk Supermarked
Denmark’s largest retailer, Dansk Supermarked, operates the
Føtex, Bilka, Netto and Salling chains, which have more than
1,300 stores across Denmark, Germany, Poland and Sweden.
It has 550 stores in Denmark altogether.
Dansk Supermarked employs a staff of approximately
32,000 in Denmark and a further 10,000 in Sweden, Germany
and Poland.
Dansk Supermarked is owned by A.P. Moller-Maersk and the
F. Salling Group and has a turnover of approximately DKK 56
billion per year.
Alan Jensen
3737
38. As the proportion of digital payments increases, we’ll
be able to save on the costs of handling cash. And
at the same time, our employees will enjoy greater
security, because cashless shops are quite simply
less attractive to criminals. The new terminals will
also enhance the customer experience in the shop
because this makes payments quicker and easier,”
Alan Jensen explains.
He adds that the new contactless terminals are
a great supplement to the initiatives that Dansk
Supermarked has already put in place to reduce
the costs of handling cash in the stores:
“Counting the cash and transporting it to and
from the bank is a major expense, generally speaking.
So we’re already doing a lot to cut these costs,
actually. For example, we’ve been using an internal
cash management system for a number of years now
which makes it possible for us to re-use the cash
in-store instead of having to deliver it to the bank
every day. With this in mind, contactless terminals
are a natural next step for us.”
Ready for the future
– ahead of time!
Contactlessterminalsalsocomplywiththestricter
security requirements imposed by the international
card companies MasterCard and Visa. Accordingly,
given that Dansk Supermarked needed to replace
most of its terminals anyway, it was only natural
to take it a step further and adopt the new cashless
technology:
“It’s important for us to be ready for the future,
so considering that we had to replace our terminals
anyway, it made sense to go for contactless terminals
straight away. That means we’re ready for the future
before the future arrives!” Alan Jensen explains.
Although Dansk Supermarked is replacing its
terminals, Alan Jensen confirms that it will still be
possible to pay for goods using conventional plastic
cards without contactless technology:
“We try to consider all our customers. I still
believe we are a long way from a completely cashless
supermarket, partly because there are still some
legal barriers remaining, but this is a step in the
right direction,” Alan Jensen comments.
Dansk Supermarked expects to be able to save
tens of millions of kroner each year by minimising
the amount of cash in the shops. •
38
Digital values
40. Exporting the
cashless society
Cash and
moonlighting
Michael Juul Rugaard: How important is cash in
terms of moonlighting and crime in our society?
Kai A. Olsen: It’s very important. The advantage
of cash is, of course, that it is anonymous. And for
a large proportion of today’s fraud and crime, the
anonymity provided by cash is vital. Although several
links in the chain can be electronic, there is usually
one link that requires cash. For instance, with falsified
invoices, it is possible to cheat electronically too, but
at some point or other, the money is changed into
cash, because without this step, the authorities would
be able to follow the money all the way through to
the recipients. But cash breaks the electronic chain,
and thus interrupts traceability, so the point is that
if you take cash out of the equation – or even just
high-denomination notes – that would make some
criminal activity very difficult. At the same time
almost all black-market labour would disappear. Of
course, bartering can be untraceable, but then we’re
back to the old-fashioned natural economy with the
requirement for transactions to take place more or
less simultaneously, the difficulty of ascertaining
value, etc. In practice, this will only be an exception
in a modern society.
The Nordic countries are in a unique position to create the world’s
first cashless region. It would save them billions of kroner, e.g. by
reducing moonlighting, and could even be the start of a highly
lucrative export adventure. Norwegian Professor Kai A. Olsen of
Molde University College and the Department of Informatics, Uni-
versity of Bergen, told us this in an interview with Digital Values.
MJR: Looking initially just at working in the black
market, is cash really necessary? If you want a
new roof on your house, and the carpenter is
willing to do it on the black market, can’t you
just transfer the money from your account to
his account?
KAO: Yes, of course, but the transaction would be
digital, and therefore traceable, so there is a risk
that the authorities could discover the transac-
tion. That could cost him dearly. Under Norwegian
legislation, and I expect in most countries, anyone
moonlighting is a criminal. As soon as they accept
black-market payments digitally, they know they
have crossed a line that can mean years in prison.
Furthermore, you, as a customer, are also partially
responsible for ensuring that the carpenter also
pays his tax. In practice, the possibility of hiding
an account-to-account transfer is far lower than
when using cash.
Once cash is taken out of the equation, you’re
forced to take a stance. And I believe the majority
will choose the honest stance and not risk being
branded a criminal. There’s another point as well.
Those who cheat on their taxes today can excuse
themselves by saying other people are doing this
too. In a society where most people pay their taxes,
peer pressure can force all to pay their taxes. ▶
Words
Michael Juul Rugaard, Nets
Images
Anders Hviid
40
Digital values
41. If you take cash out of the equation
– or even just high-denomination
notes – that would make some
criminal activity very difficult.
Kai A. Olsen
42. MJR: But there must be a triviality threshold for
tax free payments?
KAO: That’s an important point. Under certain
amounts, and when it’s not a matter of a more
systematic business, you should be able to pay
electronically without the risk of being criminalised.
It’s already the case that you can, within limits,
make tax-free payments in Norway, and the same
applies in Denmark, for small jobs like babysitting
and cleaning in private homes. So, society is already
operating with a triviality threshold. It is possible,
however, that we will have to raise that threshold
a little if we decide to remove cash altogether, just
to avoid criminalising too many ordinary people
and forcing the authorities to devote resources
to utterly insignificant, petty things. However, as
before, having the data does not necessary imply
that the authorities will use these data.
What we need to take an interest in is systematic
moonlighting, and I submit that this would basically
disappear if we did away with cash, or if we even
did away with the highest denomination notes,
which in Norway are 500 and 1,000 kroner notes.
MJR: But wouldn’t that operation be more or
less free to do?
KAO: Yes, indeed. It’s not like putting a man on the
moon; you don’t have to invest billions of kroner in
advance without knowing whether the operation
would succeed, or whether you’d ever get a return
on your investment. You could take one step at a
time, and you could always revert if you wanted
to. You could opt to remove the 1,000 kroner note
first and then wait two years and see how it turns
out, before taking the next step and removing the
500 kroner note.
MJR: But if Norway, Denmark and Sweden were
to decide to do away with their kroner, wouldn’t
we just see the black market continuing with
euros and dollars instead?
KAO: No, I don’t think so. For example, if I buy
euros in Norway, at the bottom of my receipt is
a note stating that information on my currency
purchase is being forwarded to Norway’s central
bank (Norges Bank). That is, I’m not anonymous
when I buy foreign currency. And if I buy 100.000
euros or dollars to pay of my carpenter, I’d have
difficulty explaining that.
MJR: But couldn’t I just say I’ve gone on a long
holiday?
KAO: Yes, but it’s not difficult to check whether that
story holds water, and it would just make things
more convoluted. And what about the carpenter
who would have to accept 100,000 in euros? How
would he spend that money unless he was going on
a long trip abroad himself? He would be forced to
change the money back and put it into his account
in order to be able to spend the money in Norway.
As I said, I think that very few are willing to take
the risk. While everybody can understand that
payments in cash are close to risk-free, most will
not sleep well at night knowing that all transactions
In Norway alone we
spend NOK 4 billion on
handling cash. To me, this
is absolutely unnecessary.
42
Digital values
43. are traceable. So, moonlighting is appealing today
because it’s easy, but if the risk increases, people
will probably default to the side of honesty.
Large savings
potential
MJR: But if it’s really so easy that all you’d need
to do is to take the 1,000 kroner note and possibly
the 500 kroner note out of circulation, what’s
stopping us?
KAO: As far as Norway is concerned, my explanation
is that some bankers and perhaps especially bankers
atNorgesBankareveryconservative.Further,Norges
Bank, which of course issues bank notes today,
may be afraid of relinquishing a key responsibility.
But there is a strong pressure to remove the
large domination notes. The Finance Sector Union
in Norway is in the forefront. It wants to improve
the security for its members. Without cash there
will be fewer robberies. The Norwegian Hospitality
Association (NHO Reiseliv) and others that have to
competewithblackmarketbars,pubsandrestaurants
are also applying pressure. Many businesses, both in
Norway and Denmark, have decided not to accept
cash – even though this is in violation with the law.
MJR: Assuming it is possible to eliminate the
black market by removing high-denomination
notes – how much money would that save in
Norway?
KAO: First of all, the state income tax would increase
substantially. Secondly, a reduction in moonlighting
would serve an important moral function, especially
in countries like the Nordic countries with high taxes,
where people obviously regard it as demoralising
if their fellow citizens avoid contributing to the
community. A modern society cannot function
if the black market gets out of hand. You can see
that in countries such as Greece and Italy, where
the black market and tax avoidance have strongly
contributed to destroying the economy.
Sothere’sthepotentialtosavebillionsinacountry
like Norway?
KAO: Yes, definitely – we are talking about large
amounts. In Norway alone we spend NOK 4 bil-
lion on handling cash. To me, this is absolutely
unnecessary. We spend billions on building roads
and bridges to make our infrastructure as effective
as possible, but an effective payment infrastructure
is actually just as important. And the advantage of
moving from cash payments to digital payments
is that we already have what we need, i.e. we don’t
need to invest billions in building new “bridges”
first. The Nordic Region already has an extremely
efficient payment infrastructure, and this gives the
Nordic countries a unique opportunity to take the
next step along the path to full digitisation.
MJR: Earlier this year, the Norwegian Hospitality
Association published the report Et kontantfritt
reiseliv (Cashless hospitality), and you were
the main contributing writer. The Norwegian
Hospitality Association is Norway’s largest
organisation for the hospitality sector, and the
report studies the question of whether the sector
is ready to take cash out of the equation. What
results did you arrive at in this study?
KAO: When the Norwegian Hospitality Association
chose to spend money on a study as extensive as this,
it was because they represent the organised, profes-
sional section of the hospitality sector in Norway.
They are encountering unreasonable competition
from the businesses that operate in the black market,
playing by different rules, for example by paying staff
with tax free cash and avoiding taxes and VAT. In
a country like Norway, where we pay a high rate of
income tax and 25% VAT, the unprofessional section
gains a massive competitive advantage of perhaps
30–40%bycheating.Togettogripswiththeproblem,
the Norwegian Hospitality Association wanted to
study whether the solution might lie in completely
eliminating anonymous means of payment – in
other words, notes and coins – and instead using
only traceable digital payment methods, such as
payment cards and mobile payments.
That was the remit, and the report documented
that operating in the black market is a major problem
in the hospitality sector, that eliminating cash ▶
43
Cashless society
44. would be a feasible solution, and that for many
reasons, the professional section of the sector would
welcome replacing cash with digital payments. Our
study shows that both employers and staff in the
professional section of the sector prefer payments
by payment card, for example.
One of the reasons for this is that hotel staff, for
instance, would feel safer in their jobs. Last year,
there were three hotel robberies in Oslo. These
have a negative effect on staff all over Norway. We
can all envisage the situation of a lone receptionist
staffing a hotel desk at night, knowing that there is
a lot of cash in the register.
What is particularly noteworthy from the study is
that, when we ask the staff questions about tips, they
say “Yes, we get more tip when the guest pays with
cash.” However, when we ask what form of payment
they prefer, a large percentage answer “Digital”.
That is, digital payments provide better control of
the payments, so they do not come unpleasantly
under suspicion if there are a lot of cash payments
during the evening and they are unable to reconcile
the till at cashing-up time.
Cash and criminal
activities
MJR: If we switch our focus from moonlighting,
in the sense of legitimate work but where people
just don’t pay tax or VAT, and instead take a look
at actual criminal activity, such as dealing drugs,
trafficking, etc., what is the role of cash there?
KAO: High-denomination notes are particularly
important for facilitating smooth financial transac-
tions in large swathes of the criminal underworld.
If you have a large amount of money that you need
to transport discreetly, then you’d obviously choose
high-value notes that don’t take up too much room
and don’t weigh very much.
MJR: How would a criminal operate his business
at street level in a country where his customers
no longer have cash?
KAO:Hecouldofcourseaccepteurosanddollars–as
long as those exist! But as we talked about before, it
would not be particularly straightforward or risk-free
for customers to obtain foreign currency, especially
in large quantities. It would not be impossible to
operate as a criminal, but buying and selling drugs,
prostitution, acting as a fence, etc., would be much
more awkward without cash.
Of course, not all crime would disappear just by
eliminating cash. However, many criminal activities
would become so much more difficult that this would
have an impact. Today many criminals are coming
to the wealthy Nordic countries from countries
in Eastern Europe, for example. If we became a
cashless zone, I believe we would find we were
actually exporting criminals, simply because of the
difficulty in operating without cash.
44
Digital values
45. Aninterestingpointiswhattheauthoritiesshould
do. If they arrest someone selling hash, should
they avoid using payment information from his
customers? Should they follow up on this and arrest
the customers, or would buying hash have to be
permissible? In other words, today, cash allows for
grey areas between what is legal and what is illegal.
If we take cash out of the equation, we might have
to define the dividing lines more clearly.
MJR:There’salotoftalkaboutbitcoins,anddon’t
you see a risk that, if cash is eliminated, bitcoins
will grow dramatically in scope and become the
anonymous means of payment for the black
market and criminal activity in the future?
KAO: Bitcoins and other similar virtual curren-
cies are interesting, but I regard these mainly as
experiments, and for this reason, I do believe they
will be accepted for the time being. If they do start
to gain traction, I think that it would be in the
interests of the authorities to put a stop to them.
That could be done under existing legislation, as
only the national banks are entitled to issue money.
If bitcoins became widely used, the authorities
could not possibly allow sections of the population
to use virtual currencies to avoid paying their taxes
to the community, with society missing out on
a lot of tax revenue. In addition, bitcoins would
presumably be the preferred means of payment for
terrorists and criminals. As we saw with The Silk
Road trading portal, which the FBI closed down
recently, the authorities cannot accept currencies
like these to operate. So I don’t see bitcoins as a
credible threat, and there’s no reason to believe
that efforts to make society cashless would be in
vain just because of a phenomenon like bitcoins.
But I don’t think we will ever reach that point. An
important task for national banks is to ensure a stable
currency. For Bitcoins there is no such institution,
and we see the effects now – it is a highly unstable
currency. It is therefore unsuitable for payments.
MJR: What about criminal activity at the other
end of the spectrum, such as when people send
money to tax havens in the Cayman Islands, etc.?
KAO: Obviously, a great deal of financial crime does
not involve cash at all, but society has been focusing
on this area internationally in recent years, and a
lot has already been done to make it difficult for
criminals to find secure tax havens for their money.
Here, we see the same movement we talked about
earlier: in future, the chances of being detected will
be so great that most people will no longer want
to run the risk.
MJR: Are today’s payment systems good enough?
KAO: Well, the survey we performed for the
Norwegian Travel Association showed that many
peoplewerenotcomfortablewithkeyinginPINcodes
in crowded pubs and bars. But this doesn’t have to be
the case. Mobile payments are part of the solution.
Another part is to give the customer more control.
For example, to “load” an amount onto the card
that subsequently can be used PIN-free to specify ▶
Kai A. Olsen
45
Cashless society
