News & Views - Savantor

How to move away from cash

Monday, 15 July 2013

We know that there is an ongoing debate as to whether or not cash use is declining in the UK but there are some countries where it is certainly happening in a big way.  Given that the cost of handling cash is high, it is in the interest of governments and banks to move away from cash. In some countries, effective policies have made a difference, whereas in others, it is thanks to consumers being more open to using mobile or plastic payments. Here are a couple of examples of countries that are making significant moves toward becoming cashless:

In Sweden the number of bank robberies dropped from 110 in 2008 to 16 in 2011 largely because most Swedish banks don't handle cash anymore.  Cash transactions are down to just 3% of the national economy (compared to 9% in the Eurozone and 7% in the US); public buses don't accept cash; and three out of four of Sweden's largest banks are phasing out the manual handling of cash in bank branches.  Norway is also making the transition to cashless, with approximately 11% of the population not carrying cash at all.

In South Korea the government has successfully put into place policies to encourage cashless behaviour such as introducing a preferential VAT treatment for consumers who pay with cards, moving the share of cash from 40% to 25% within four years from 2002 to 2006.

Although Somaliland is one of Africa's poorest countries, a mobile revolution has created an informal electronic banking system with more efficiency and convenience than many far more developed countries in the world. Cash is disappearing and there is no need for credit cards because even street vendors accept payments by mobile phones. A survey in 2012 found that the average customer made 34 transactions per month on their mobile phone—higher than almost anywhere in the world.

As the Bank of England has just appointed a Canadian as Governor it could be an interesting time as in Canada payment by credit, debit and bank cards is almost 70% compared to a world average of 40%.

     

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