Lars Nyberg: Time to change cash to cards? Speech by Mr Lars Nyberg, Deputy Governor of the Sveriges Riksbank, at the 9th annual Nordic Card Markets conference, Stockholm, 20 January 2010. *  *  *  More often than not, the Riksbank is associated with the objective of maintaining price stability, which is usually interpreted as attaining a low and stable level of inflation. However, we also have another objective, namely promoting a safe and efficient payment system. What this means in practice is less obvious, but our entire responsibility for financial stability, which has undoubtedly been in focus over the last 12 months, in fact rests on this wording in the current legislation. This task includes promoting the development of safe and efficient payments. This is why we take an interest in cards and cash and it is also why I am here today. The Riksbank’s responsibility for the payment system also includes having the sole right to issue notes and coins. This may seem self-evident today, but it has not always been the case. Up until the early 1900s, the private banks were entitled to issue notes under the supervision of the Riksbank. The view of what the Riksbank should do and what private market players are expected to be responsible for has thus developed over time. Up until only a few years ago, the Riksbank was also responsible for the storage and, partly, the distribution of notes and coins throughout the country.
For sums higher than this it was cheaper to use cards. If we now compare this with the choices that the consumers actually made, the conclusion is that in 2002 it would have been better from the point of view of the Swedish economy if the consumers had made more payments by card and fewer payments in cash. From society’s point of view, it was profitable to pay by card when the sums were higher than SEK 70, but, as was the investigation from 2006 made evident, the “average consumer” nevertheless chose to wait until the sums were higher than SEK 123. Eight years have now passed since the study was conducted and it is much more likely that the costs of using cash have increased rather than decreased. For example, the costs for increasing the security of transportation and ATMs have been substantial. On the other hand, available evidence suggests that a card payment costs somewhat less today. One reason for this is that the shops’ costs for getting a card payment redeemed seem to have fallen due to increased competition between the card acquirers. The level at which it becomes more advantageous to the economy to use cards rather than cash has therefore probably fallen below SEK 70. The survey we conducted last year shows that we use cards to an increasing extent and for smaller and smaller payments. It is not unlikely that today’s “average consumer” would choose to pay by card for an amount below SEK 123.