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June 8, 2010

In depth: Sweden may go 100% cashless to fight crime

In another pioneering example from Scandinavia, which became wired-up much quicker than the UK, in a bid to fight crime Sweden may take a very radical move - and do away with cash altogether, writes Gary Flood.According to a report in German news

By Cbr Rolling Blog

In another pioneering example from Scandinavia, which became wired-up much quicker than the UK, in a bid to fight crime Sweden may take a very radical move – and do away with cash altogether, writes Gary Flood.

According to a report in German news magazine Der Spiegel, lobbyists are pushing for the nation to move to a completely virtual currency basis. What’s interesting is that this is a drive from the bottom up – it’s the big Swedish banking trade union (the level of union membership in Sweden is very high, at 71% of all employees) which is pushing for the change, not politicians.

Why? The group says it’s fed up of its members being hurt and terrorised in the workplace in the wake of a rise in very nasty armed robberies. The union even has a “robbery barometer” which it uses to shocks the public to help argue its case, a metric that’s shown that 25% of the employees in the Swedish retail sector have become victims of such violence, some of them more than once. (Where was Wallender?)

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The problem is acknowledged by other forces in the Swedish economy, like the office for industrial safety and executives at the capital’s central bank, who contend that too much currency in circulation is either the profit of illegal activities, part of the Black Economy or just too easy to hide from the authorities. Indeed, the lobby goes so far as to say people preferring cash in a modern economy “have something to hide” while the Stockholm chief policeman is quoted in the article as believing, “Cash is the blood in the veins of the criminality.”

Sweden by the way is not part of the eurozone, so is entitled to make its own decisions about what to do with its currency, such as force its citizens to go cashless. As, of course, is the UK. Whether or not that will happen soon is of course doubtful, but the implications are fascinating.

In the UK, the move to chip and PIN is held to have not just cut down fraud but is of course the platform we’d have as a society, presumably, if we also evolved to a cashless economy. On the former, Financial Fraud Action UK, the group that monitors such things here, last October said such fraud declined £233m, or 23%, in the first six months of last year alone, for instance. Chip technology itself, as VISA has said, opens a world of payment options, including multiple payment combined with other (non-payment) applications on a single chip card, more self-service and so on.

Great – but then we run into some problems. Why is your Oyster card only able to get you round London and not let you buy your Daily Star at the tobacconists by the entrance? Why can’t you as yet buy a bottle of milk in Sainsbury’s with your mobile phone, or indeed stop carrying round lots of bits of plastic and have your PDA be your online bank and credit card device?

The problem is that there are still fiendishly hard security, verification and identity management issues to be solved – a process that will take years. Bill Gates was talking about electronic wallets way back in that odd little book of his The Road Ahead (1995) but really, we’re no nearer them. And we’re only just starting to talk here about getting rid of cheques, ridiculous pieces of paper that allow banks to sit on your money for days at a time.

Nonetheless – the Swedes are on to something here. Money laundering exists because cash by its nature can be accumulated on the margins and out of sight of the taxman and the authorities in general. Get rid of cash and a lot more money would go to pay for our roads and hospitals and less people would have to fear mayhem in their workplaces, presumably.

But then: what would criminals do instead? They’d use the Internet. You ready for that, as manager of your organisation’s network? Maybe we shouldn’t run into a virtual economy until we have dealt with all the problems we now have, perhaps?

By Gary Flood

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