4 In the year 2002 the costs to society for managing cash were SEK 6.6 billion or 0.3 per cent of Sweden’s GDP. 5 This includes an estimated cost for the time the general public spends on fetching cash and managing it. Almost half of the costs to society arose within the banks and Svensk Kassaservice. Almost an equally great percentage arose in the retail trade, among transport companies and among the general public together, with costs distributed fairly evenly between the three groups. The Riksbank’s and the cash depots’ shares of the total costs to society were modest. The same study estimated the number of payments with cash made in one year at SEK 1.4 billion. This means that each cash payment made in 2002 led to a cost to society of on average SEK 4.6. The costs to society for cash payments in 2002 were estimated at SEK 1.9 billion, which corresponded to almost 0.1 percentage of GDP. That year, 589 million card payments were made. 6 This means that each card payment cost society an average of SEK 3.0. An average card payment is thus around 35 per cent cheaper than a cash payment. Around 2.3 billion transactions were made by card or cash 2002. We estimated that more than 70 per cent of these were paid in cash. There thus appear to be evident cost savings to be made through a reduction in the use of cash.
At first glance it would appear that card payments – which are 35 per cent cheaper for society to produce – should replace cash completely. But it is not quite so simple. There are major differences in how cards and cash are produced. Card payments require an extensive infrastructure of terminals, computers and lines of communication and have substantial fixed costs. But the cost of a card payment is always the same, regardless of whether one uses the card to pay for a purchase amounting to SEK 50 or SEK 50,000. For payments made in cash the variable costs are substantial. Cash payments require considerable physical management such as transport, counting, storage of banknotes, etc. The larger the transaction amount, the more expensive the actual cash payment will be, as it involves a larger share of this management. For payments of small amounts the cost of cash is therefore lower than the cost of a card payment. This means that from society’s point of view, cash may be preferable for making small payments. To obtain an idea of what the size of a transaction may mean, we estimated the costs to society of a cash payment and a card payment respectively as functions of the transaction amount. In this way we could also calculate when it was profitable to pay in cash. The results show that – at lease in 2002 – it was most cost-efficient to pay in cash for purchases amounting up to almost SEK 70. 7 Above this, card payments were always preferable.