Is Sweden's Path Towards a Cashless Society the Right One?

When we think of waves of the future, driverless cars and artificial intelligence (AI) come to mind. There was something that I recently came across that I did not think could become a relic of the past, and that was cash. For some, the idea of a cashless society might seem like something in the distant future. However, a cashless society might not be so distant. Sweden is well on its way to having a cashless society. In November 2018, the New York Times reported that a fifth of Swedes do not use ATMs, and that cash only represents one percent of the Swedish economy (compared to eight percent of the U.S. economy or ten percent of the European economy). It has reached the point where half of Sweden's 1,400 commercial bank branches do not accept cash deposits. While the Swedish financial market is trending more towards the e-krona and more away from traditional cash, it makes me wonder if the benefits of a cashless society outweigh the costs. I'm not going to be able to cover every single point in great detail here, but I hope to provide an overview in attempts to answer the question.

Advantages of a Cashless Society

• Reduced business risk. Cash comes with a certain amount of risk, including robbery of cash, theft of cash from employees, and counterfeit money. If cash gets stolen, it is gone. If a credit card or some form of e-payment gets stolen, it has a better chance of getting recovered.
• Reduced crimes. A cashless society would make it more efficient for governments to collect money. This would not only reduce the size of the underground market, but it would also reduce rates of tax evasion and money laundering.
• More efficient method of paying. With the removal of cash, it would mean not wasting time at the checkout line for customers, improved customer experience for businesses.
• Simplification of international transactions. When you travel abroad, you don't have to worry about exchange rates: the mobile device can calculate it for you. 

Disadvantages of a Cashless Society

• Identity theft and data breaches. The 2018 Cambridge Analytica scandal made us realize just how vulnerable our data can be to hackers. If successful, hackers could potentially wipe out savings with a few keystrokes. This vulnerability is especially problematic with the retail industry, which is more dependent on electronic payment transactions. Cash payments have the advantage of being able to work with minimal infrastructure when there are breaches or outages. Speaking of outages.....
• What happens if the Internet or electricity is down? As Sweden's central bank (Riksbank) explains, ATMs need electricity. The Riksbank also acknowledges that alternative forms of payment would need to exist in order to deal with times of crisis. 
• Financial crisis. Some would view cash as more reliable during a financial turndown. On the other hand, the odds of there being adequate cash reserves are slim to none (Bank of Canada).
• Smartphone Issues. This disadvantage assumes that transactions are conducted with smartphones. If so, this would make losing your smartphone or having it stolen all the more damaging.
• Could lead to more overspending. A premier research paper showed how people react to certain types of payments (Raghubir and Srivastava, 2008). The more transparent the payment outflow, the more aversion towards spending. In short, it means that people feel "the pain of paying" more when using cash than when using electronic funds. This would be troublesome for a country with a low savings rate, such as the United States.
• A study from the Journal of Consumer Research (Thomas et al., 2011) showed that those who use electronic payments are more likely to purchase unhealthy foods, whereas another study from the JCR shows a better attachment to the products purchased with cash (Shah et al., 2016). 
• Increased inequality. It can lead to the vulnerability of the elderly because they are not used to digital media (see U.K.-based "Access to Cash" report). Immigrants are also less technologically savvy. Beggars typically receive their alms in cash. The Riksbank is confident that it can market to the elderly and get them more capable of managing day-to-day transactions digitally. That's for Sweden. On a global level, there are currently 1.7 billion people without a bank account. In the United States, 8.4 million households were unbanked, with an additional 24.2 million that are underbanked (FDIC 2017 Household Survey). This would mean that a quarter of U.S. households are inadequately banked, which could spell trouble for transitioning over to a cashless society.
• For more detailed skepticism on a cashless society, read the Cato Institute's 2018 policy analysis here. 
• Also read the argument as to how the "war on cash" is an assault on freedom.

Postscript
It is difficult to predict the effects of a cashless society at least in part because there has yet to be a cashless society. The overall trend line towards a cashless society also depends on the dynamics of each country. Swedish demand for cash has declined over the years. A country like Canada, on the other hand, has its demand for cash growing at a similar rate to its nominal GDP (Bank of Canada). The Bank of Canada also notes that the declining demand in Sweden is an outlier. Sweden also has developed a cultural shift away from cash in a way that other countries have yet to develop.

Given technological advancement, I would say that as time passes, there will be less cash in the world. I would surmise that at least for a while, it would not be a straight-up cashless society, but I can certainly see less cash. This trend could be comparable to printed books versus e-books in that in spite of the technological gains, there is still a preference for doing things "the old-fashioned way." In the meantime, we'll see how quickly the change happens.