#Anti Money Laundering #Financial Crime Prevention #ICA News & Misc

Are we becoming a cashless society?

International Compliance Association

AML , Biometrics

We’re heading towards a cashless society. For many people, we’re already there with contactless cards, mobile payments and online shopping hugely popular and continuing to grow year-on-year. Biometric technology is also growing in popularity, so is this really the beginning of the end for cash?

I’ll admit I don’t carry as much cash around as I used to, but I’m not sure I could get by without cash completely. I have a contactless card, but can’t imagine using it to pay for an ice cream for the kids or an emergency loaf from the local shop. Cash is my preferred choice in these scenarios. But there are some countries that have taken the cashless option on as a serious consideration, right down to small denomination, single purchases.




Sweden have been at the vanguard of the cashless society movement for a while. In a regular survey conducted by Sweden’s central bank, Riksbank, it was found that cash transactions have been gradually reducing. For example, in 2016 only 15% of those surveyed used cash in their last transaction compared to 33% in 2012, and an increasing number of people find this decline in the use of cash to be a positive development.

Riksbank also claim that out of all the purchases made in shops, barely 20% of the transactions are paid for with cash, way below the global average of 75%.

Many Swedes don’t use cash at all, as shops simply don’t want it. In fact, retailers in Sweden are legally entitled to refuse to accept coins and notes, and you can’t buy a ticket on the Stockholm metro with cash anymore.

This change is encouraged by the take up of cashless options in Sweden, which is growing at a brisk rate. For example, Swish is an enormously popular app that was developed jointly with some major banks, including Nordea, Handelsbanken, SEB, Danske and Swedbank, and allows anyone with a smartphone to transfer money from one bank account to another in real time.

Another is a system called iZettle, which is used by street vendors and small businesses in Sweden to take card payments and is reportedly seeing sales increases of up to 30%.



One of the forerunners of a cashless system was the introduction of cryptocurrency over ten years ago. Established as ‘a system for electronic transactions without relying on trust’, was opened anonymously in 2009 and has grown rapidly in popularity since then.

Cryptocurrencies like Bitcoin are not considered legal tender in most countries, but it does offer people the freedom to transfer assets to different parts of the world in a matter of minutes. More and more stores are now opting to accept Bitcoin as a payment option, and this will only drive more people to use it.

Some feel that the increased popularity of cryptocurrencies will actually help to raise awareness of the advantages of a cashless society, although as governments look at this development more closely, they are much more likely to begin to seriously consider regulating cryptocurrency transactions, something that enthusiasts of cryptocurrencies may not be keen on.

To an extent, this has already started, with some countries like Russia, Canada, China and Japan beginning to study how to embed cryptocurrency into their financial systems.


Black economy

One of the biggest arguments for moving to a cashless system is the impact it could have on the black market and money laundering. Much of the cash in circulation cannot be accounted for by banks. A proportion of this unaccounted cash is a result of cash hoarding, which has been on the increase. This has been driven, some believe, by the effects of the financial crisis, which has led some consumers to think they are better off hiding their cash away rather than leaving it in a bank.

It is widely thought, however, that the majority of the cash in circulation is in the hands of money launderers. If a cashless system was introduced it would warrant this dirty money practically useless, potentially having a huge impact on global criminality and the movement of ill-gotten gains. This alone is a strong argument for phasing out cash.

All this sounds perfectly reasonable, doesn’t it? We utilise existing technology to make financial transactions safer, faster and more efficient, whilst at the same time help win the global fight against money laundering too. Result!


Cash in circulation on the increase

Why then is there an increase in the number of notes and coins in circulation? Despite the new technology available to consumers, and the take up of cashless options in Sweden, there appears to still be a significant demand for physical cash across many jurisdictions, particularly in the ‘workhorse denominations’, such as $1-$50 and €1-€50.  

Additionally, the UK is mid-way through a programme of introducing brand new polymer bank notes – the £5 and £10 versions are already in circulation and the new £20 is scheduled to be launched in 2020 – suggesting there are no plans to support a significant move to a cashless system any time soon.

If the number of these lower-level denominations is increasing across major jurisdictions like the US, UK and EU, this suggests that there is still a strong demand for cash at these smaller transactional levels. The amount of usage will undoubtedly vary from one country to the next, with Sweden being an exceptional case, but it is still a strong indicator that cash will continue to be around for the foreseeable future.

One of the reasons why cash is still king for some is that it does not have to rely on technology. If a server goes down or a gremlin appears in the system (technical term), cash will still work, but many cashless options won’t. This appears to be a strong motivator for some to continue using cash.

Of course, there are other reasons too. Maintaining one’s privacy, for example, appears to be a factor. Fundamentally, there’s no need for a bank or any other authority to know the exact details of every transaction you and I make, so using cash for certain transactions can offer a level of anonymity that many still value.

What appears certain is that there is still some way to go before we reach the cashless utopia some have predicted will happen in the next decade. What do I think? I just can’t see a bunch of 8-year-old kids queueing up at the ice cream van with their contactless card in hand, so I think cash will always have a role to play somewhere.




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