“The future belongs to non-cash forms of payment” Lenta.ru found out about the Swedish experience of refusing cash

The electronic payment market in Russia is one of the most dynamic. Its growth in 2012-2013, according to some sources, will be measured in double digits. At the beginning of November, the National Payment Forum was held in Moscow, where the prospects for the industry were discussed. The National Payments Council Association invited Lars Rutberg, senior legal adviser to the Association of Swedish Banks, to speak about his country's experience in phasing out cash payments.

Lenta.ru decided to talk with Mr. Rutberg to learn more about the changes in the payment preferences of Swedish citizens and to understand how Swedish achievements can be adapted to Russian reality. It turned out that the main condition for the boom in non-cash payments is the widespread use of personal computers and the Internet. The state, according to Rutberg, did not interfere in any way with the development of electronic forms of payment, which are almost two times cheaper than cash forms of payment. As a result, Sweden's younger generation is now increasingly transferring money to each other using mobile phones, and the amount of cash in the economy has fallen by 20 percent in ten years.

Lenta.ru: What are the main reasons for the gradual replacement of cash payments with non-cash forms of payment in Sweden?

Lars Rutberg: In the early 1990s, the government helped the population buy computers. We have a very high percentage of the population with their own PCs. I think everyone has them. This meant that it was easier for banks to move their operations from the real space to the virtual one. Another important reason was the desire to reduce costs. Serving every client or customer who comes to the bank is actually quite expensive, both from a financial point of view and in terms of time. So credit institutions have been determined over the last 10-15 years to move part of their customer service to the Internet or carry it out over the phone. The third reason was the significant number of plastic cards in Sweden. On average, people make up to 250 purchases with their cards per year.

How much more costly is using cash compared to non-cash payments?

Cash costs are indeed higher. A couple of years ago, the Swedish Central Bank participated in a study by the European Central Bank. They were trying to understand how much it costs to maintain cash all the way, that is, from production to storage and transportation. It turned out that cash is the most expensive method of payment. I can't give specific numbers, but online payment costs about half as much as paying in cash.

According to the Association of Swedish Banks, by December 2012 there were 117 banks in the country, including branches of foreign credit institutions. The Swedish financial market is dominated by the Big Four, which includes Nordea, SEB, Handelsbanken and Swedbank.

Did the government help in any way to phase out cash payments?

No, I would not say that the government was somehow involved in this process. The main reason for the proliferation of online payments was the significant number of computers per capita. The government sought to transform Sweden into a leader in IT and the Internet. Thus, they indirectly eased the transition from traditional banking to its online versions. Apart from this, the government did not take any steps, that is, did not issue laws or regulatory measures. Naturally, the government did not in any way oppose the spread of non-cash payments.

Have the government and banks engaged in any public education or advertising campaigns to convince people of the benefits of online banking? Or are we talking about a purely economic phenomenon?

I think that over time it has become easier for people to pay for goods and services using cashless forms of payment. In terms of the number of plastic cards per capita, we are probably in second place in Europe after Norway. Sweden is a very comfortable environment for plastic card holders. Using a plastic card is convenient and not so expensive. Swedes pay for most expensive purchases with credit cards, and for more affordable items with debit cards. And only some everyday products and goods, for example, magazines, are purchased for cash.

We are pursuing a gradual phase-out of cash. The Swedish Central Bank is one of the active proponents of this approach, as are private banks.

What is the value of cash currently in circulation in Sweden?

According to the latest data, we have up to 80 billion Swedish crowns circulating, which is almost 12 billion dollars. However, ten years ago there was 100 billion kroner in cash in the economy.

We will reduce our cash holdings further over the next few years. In 2016 we will introduce new banknote designs. Accordingly, the old banknotes will return to the banks. As is usually the case, part of the funds will remain with the population. This will reduce the amount of cash money supply.

Was Sweden different from other Scandinavian countries in phasing out cash forms of payment?

No I do not think so. All states of northern Europe are similar to each other. We have a high percentage of plastic card holders everywhere. Perhaps, however, Finland stands out a little. It is a member of the European Union and is part of the eurozone. In addition, the e-Invoice system is actively developing there.

e-Invoice is an electronic document management system that allows, among other things, the conclusion of contracts and transactions. For consumers, e-Invoice is convenient because it helps make payments in online stores using online banking services without entering account details. The European Union is working to increase the use of e-Invoice as part of the SEPA project. According to the organization, e-Invoice will help save up to 64.5 billion euros per year.

In Sweden, for example, debit cards and the Giro system are common, but checks have practically disappeared. Banks charged high fees for using them, which reduced consumer interest. Checks still remain in the b2b (business to business) sphere, but even there there are very few of them.

In addition to the high degree of penetration of computers and the Internet, are there any other prerequisites for the development of non-cash payments? Should the population have a certain level of financial literacy and wealth in order to quickly switch to online payments?

This is a difficult question, I cannot say how accustomed Italians or Russians are to plastic cards. The boom in credit card payments will only happen if the local infrastructure is ready. I don’t think the authorities can play any role here; the process must come from below. And it takes time - it took Swedish banks 15-20 years to reach the current level of cashless payment penetration.

Payments using mobile phones are now actively developing. You can access almost any service from your smartphone - this is the next step. We are developing financial services that are aimed at mobile phone users. For example, a 17-year-old will use his phone for a wide range of services, while my father only used cash. I think cashless payments may exacerbate the generational problem. The older you are, the more likely you are to use cash only. This is true for all states.

Do you think that the transition from cash to non-cash payments could have social consequences? While governments sometimes push plastic cards on citizens, they can be too complicated for older people...

The situation is really very delicate. With plastic cards you must remember your PIN; they are not always convenient for people with poor eyesight and so on. In Sweden, older people often do not feel comfortable having to resort to plastic cards. They make up a fairly significant group of consumers who are skeptical about cards. But there are also those who are actively mastering the Internet and online payments. However, they are rather the exception.

According to the Association of Swedish Banks, up to 80 percent of Swedes pay their bills online. The country of nine million people has 10.3 million active online banking accounts.

If we speculate a little on the topic of a complete refusal of cash, when will this happen? At least in Sweden?

Even in Sweden we don't expect to go completely cashless for the next 30 or 40 years. Cash is still important to people. In the distant future, I believe we will invent something more efficient, because cash is certainly not the most convenient way to pay.

What trends in the development of the non-cash payments market can we talk about now in Sweden?

Of the most important things that have happened in Sweden recently, I would like to highlight the implementation of the SWISH mobile payment system by the country's six largest banks. It is valid for individuals. Its essence is that the phone number is “linked” to a bank account. Operations are carried out in real time with Central Bank money ( the bank operates with Central Bank funds, moving them across the accounts of its clients - note from Lenta.ru ).

Screenshot of the Swish mobile application
http://www.wpcentral.com/

System safe?

I think yes, very much so. For example, if I want to buy something, I can make the purchase from my mobile phone. The bank will transfer money from my account to another with the help of the Central Bank. This system is often used by young people, and we hope that over time it will become more popular. The next step will be the introduction of the ability to make payments from buyers to sellers. After this, we expect explosive growth in the number of users.

For SWISH, banks developed a new platform that made it possible to make payments in real time. I think it can be used for other financial services. In principle, this is the only truly “new” non-cash payment system over the past 20 years.

Another trend in our non-cash payment market is the spread of e-Invoice. e-Invoice messages are sent directly to your e-banking account. You click on the message and can pay your bill immediately. More and more companies are interested in this technology. In particular, my account receives e-Invoice messages from seven to eight companies, including those from the housing and communal services sector. This is very convenient from an environmental point of view - less paper, cheaper for everyone involved in the transaction and more attractive to consumers.

New payment methods arise only on the basis of appropriate infrastructure. Cashless payments must be fast, functional and attractive to consumers. Clients are usually not interested in the “behind the scenes” and mechanisms for implementing new technologies.

Financial infrastructure, in particular, must function without interruption. If it stops even for a couple of days, then society will collapse.

By the way, Swedish media recently published a story about the ABBA museum. It opened eight months ago. The museum does not accept cash for payment - this was the wish of Bjorn Ulvaeus. He didn't want dirty money. It turned out that 99 percent of visitors approved of the refusal of cash, except for Russians and Germans.

The ABBA museum in Stockholm, which refused to accept cash payments. Former band member Bjorn Ulvaeus is a strong advocate for the transition to electronic payment methods

Photo: Jonas Ekstromer / Scanpix / Reuters

Non-cash payment methods promise greater transparency of transactions. Do you think their implementation will help fight crime? And what can be said about the security of electronic payments themselves?

I think everything is very uncertain. Of course, cash, checks and bills can be counterfeited, and cybercriminals are active on the Internet. There are experts who warn that the spread of the Internet and related financial services is making this area increasingly attractive to criminals. At the same time, I believe that it is very difficult to assess the scale of danger on the Internet. With counterfeit cash, you can at least limit the extent of the damage.

All those who use electronic financial instruments are very careful about security. Our association also pays extremely close attention to these issues.

Which states can be considered the most advanced in the field of non-cash payments?

First of all, Scandinavian. The Netherlands and Germany have also achieved high levels of online payment penetration. This applies to a lesser extent to the UK. If we talk about Europe, the further south or east you go, the less common plastic cards will be. I'm talking about Portugal, Spain, Italy and some central and eastern European countries - for example, Slovenia.

How long will it take for these states to close the gap?

Probably five to ten years. I often discuss electronic payments and online banking with my colleagues in Spain, Italy, Cyprus, and they are still far behind in these areas. But you need to understand that the future belongs to mobile banking and non-cash forms of payment.

Do you think the Russian government can learn something from the Swedish experience?

We had several visits from the Russian Ministry of Finance. They are definitely keen to learn more about our economy and financial sector.

Interviewed by Alexander Ratnikov