Is the Future of Europe Cashless?
03 Apr 2025 – Written by Sarah Hunter
Summary
Digital banking and online transactions have become an underpinning of the way in which we carry out financial activities in modern society.
The widespread use of digital banking in a post-pandemic world has led to many businesses and individuals carrying out economic activity online, and has seen the further development of payment technology.
This has arguably resulted in the decline of cash usage, specifically in nations such as Sweden and Norway, who predominantly favour digitalised payment methods.
An entirely online banking and payment system would provide greater ease for consumers and create space for wider levels of innovation.
However, a global digitalised economy must first ensure that all individuals have universal access to the technology needed for this societal shift and guarantee that there would be less technical and security risks moving forward.
Introduction
This article aims to explore the idea of a cashless Europe. Firstly the article will provide an explanation and background of digital transactions, the decline of cash usage and the theme of a cashless economy. The essay will then delve into looking at examples of European nations whose individuals are favouring alternative payment methods and the diminishing use of cash in these economies. According to Duignan (2024), a cashless society ‘is one in which cash, in the form of physical banknotes and coins, is not accepted in any financial transaction’. Therefore an entirely cashless society is one that may not have or may be phasing out the use of physical cash completely, and would merely use either forms of digital currencies or transactions between consumers and producers. There is no economy in Europe at the time of writing that is entirely cashless, or that solely relies on a digital currency, however with constant innovation in technological development, and some countries beginning to reduce the usage of cash, we may see cashless societies in the near future. The main economies explored in this article will be both Sweden and Finland, who have seen a rapid increase in the use of digital payment methods, favouring this over trading with cash.
Background into Digital Currency
As noted above, a cashless society is one in which the use of physical cash is not permitted. This can be carried out and enforced by governments, banks and sales merchants.
A shift in societal demand for innovative technology has arguably propelled the use of digital payment methods. ‘Virtual wallets’ such as Apple Pay have become a main method of payment for many individuals, with Laborde (2024) noting that ‘in 2022 the global user base for Apple Pay surpassed a staggering 535 million’. With Apple Pay transactions and mobile banking being increasingly user friendly, they have become extremely popular ways to assist market transactions, and leave little reason for consumers to carry cash.
A post-pandemic society has seen a rapid decline in the use of physical cash, in some countries more than others. During the height of the Coronavirus pandemic in 2020, many retailers globally introduced card or contactless only payment methods, to keep the physical transfer of cash to a minimum. This was done so to decrease the risk of the infection spreading, by maintaining social distancing and having fewer items change hands.
Whirlwind developments in banking technology additionally made this extremely simple to adhere to, mobile banking and contactless payments being made over smartphones has again lessened the need for individuals to be carrying cash or making payments through this form.
Furthermore, encouraging the use of card-only payments also reduces cash flow, accelerates transaction between economic agents, encourages the further development of online commercial activities and introduces new forms of financial services (Arabadzhy et al.,, 2021, pg. 9). Therefore the shift to a cashless economy arguably works to contribute to economic growth and produces greater grounds for innovation.
Moreover the fear of the spread of the coronavirus, ‘led businesses to expand their digital offerings and consumers to rely increasingly on mobile and online channels to conduct day-to-day activities (Toh & Tran, 2020, pg. 1). Throughout the duration of 2020 and the subsequent forms of lockdown saw a shift in the way that economic activity was and remains to be conducted.
This was not solely through consumption and production but also working conditions also, with working culture being shifted to remote conditions, and remaining largely so even today, which has additionally led to an increase in the volume of online transactions.
Additionally, the World Bank has noted that in lower income countries, over 40% of adults making card payments either online or in store, did this for the first time as the pandemic began (World Bank Group, 2022). Therefore, although prior to 2020 there were shifts in trends moving towards favouring digital payments over physical cash, the pandemic was a defining factor in the decline of transactions of this nature.
In mid-2019, prior to the awareness of a global pandemic on the horizon, the Economist published an article entitled ‘Rich countries must start planning for a cashless future’, where the costs and benefits of swapping to cashless societies were highlighted. The article detailed that there were two main forces propelling the decline of cash. These were; changing youth attitudes and the need for consumption to align with digitised lives and, the rapid technological developments being made by banks, who are invested in reducing the high costs involved with cash usage (Economist 2019).
Therefore, with both the attitudes of the new generation of consumers and the banking industry changing, alongside the constant digital innovation of transactional services and living in a post pandemic world, all of this has seen a greater push towards cashless societies.
Applied to Europe
There are currently no economies in existence defined as being entirely cashless, however there are a notable few who appear to be moving in that direction. The European nations that use the least amount of cash are Sweden, Norway, The Netherlands and Finland, with the majority of individuals in these countries owning debit cards or online banking apps, and the amount of cash payments falling overall (N26, 2021). Again this was initially highlighted prior to the pandemic, with attitudes towards digitised methods of payments in such nations changing and fewer people using physical cash.
Wischnewsky (2024) has noted that the introduction of national payment systems across Scandinavian countries have occurred due to a shift in declining demand for the use of bank notes, as opposed to solely supply side goals of expanding consumer databases. Arguably both changes in demand and supply have led to the overall reduction in cash usage, however such innovative methods of supply have notably arisen due to shifts in consumer demand.
Gen Z consumers have played an instrumental role in these movements in demand towards contactless or digital payment methods. Kaempfer and Elinson (2024) have noted that Gen Z consumers are the leading generation in adopting cashless payment methods, and what remains of the upmost important to these young individuals is easy consumption without unnecessary steps such as entering pin numbers. The new generation of consumers and producers therefore increasingly favour cashless means of payment, and through this are changing the way that payments are being made and accepted. Generation Z are also referred to as ‘digital natives’ having grown up with the use of technology, and ‘more than 95% of Gen Zers own a smartphone’ (Howarth, 2024). Therefore, with almost all younger consumers regularly using technology and owning devices such as smartphones, digital payment methods are increasingly accessible and easy to use.
Sweden is one of the closest European economies to being almost entirely cashless. According to RiksBank, the Swedish ‘payment market is becoming digitalised’ (Riksbank 2020). This digitalisation is done through either the use of credit or debit cards, or mobile payments such as PayPal, Apple Pay or the Swish App. The diagram presented below represents the amount of cash in circulation as a percentage of GDP across 5 different nations and the Euro area. It appears that the use of cash is declining and continuing to decline most notably in both Norway and Sweden. In early 2019 and 2020, less than 2% of all transactions in Sweden were done using physical cash (Hammarberg 2020).
Swish transfer is a payment method that has become increasingly popular in the Swedish economy, with over 8 million Swedish residents using swish as a preferred method of payment just 10 years after its establishment (Swish, 2024). Swish is a mobile application which allows its users to transfer money to other individuals or businesses, through linking their phone numbers to online banking details. Users can therefore make payments instantly with the transaction arriving to recipients in that moment.
Swish initially consisted of a membership of Sweden’s six largest banks being in partnership with the company, however this has now expanded to include many others. The governor of Riksbank in a speech given back in 2017 stated that ‘half of Swedish traders believe they will stop accepting cash by 2025’ and that Swish is being used for ‘transactions that used to be mostly cash based’ (Stefan Ingves Speech 2017 pg. 3).
The above diagram highlights the percentage of people paying in cash for their last purchase in Sweden from 2010 to 2020. This number has fallen drastically over the 10 year period, with almost 40% of people paying with cash for their last purchase in 2010, compared to around 9% in 2020. Moreover, there has been a dramatic change in consumer and producer preferences regarding methods of payment. This again has been affected by multiple different factors: changing societal attitudes, increased innovation in production and technology, further digitalisation, and changes in working and earning habits.
Furthermore, Arvidsson has argued that the Swedish economy is becoming more digitalised due to Swedish infrastructure and the fact that ‘Swedes tend to trust banks, we trust institutions, people are not afraid of the sort of ‘Big Brother’ issues or fraud connected to electronic payment’ (Arvidsson as cited in Savage 2017). This may highlight the main reasons as to why the Swedish economy is becoming cashless at a much faster rate than others. Not only is Sweden a small country that is well connected and innovative in its technological developments, but also people in Sweden feel they can put trust into their banking systems and governments. A lack of connection between consumers and governments may halt or delay the further digitalisation of the European economy.
For example, as the chart below demonstrates, a majority percentage of citizens in both Greece and Italy in 2019 were unhappy with the way their country was governed and directed. Furthermore, Stogdon has noted that ‘over 70 percent of people in Greece still use cash at points of sale’ (Stogdon, 2024). There is a correlation between the amount of cash used in an economy and the trust those individuals feel they can put into their government. The majority of people in Sweden feel that their government is working well and they have made the switch almost entirely to a cashless economy. The majority of people in Greece feel that their government is not working well and over 70% of individuals still rely on cash based purchases.
Similarly to Sweden, Finland is another economy notable for its shift towards an almost cashless society. It has been stated by the bank of Finland that it is predicted for the country to be entirely cashless by 2029 (N26, 2024). Almost all individuals residing in Finland own a debit card and the majority also own credit cards (Oban International, 2023). There again, appears to remain a correlation between Finland going cashless and the citizens positive feelings towards the manner in which the country is governed.
Finnish population reported trusting the government, compared to an OECD average of 45%’, moreover in 2020 during the pandemic, over 80% of the Finnish population felt that their government was reliable and trustworthy when sharing information (OECD, 2024). This therefore adds to the notion that the more reliable a population feels their government is, the more they trust methods of payment which are not cashless, and move closer to being a digitalised economy.
What would a cashless economy look like?
Sweden and Finland appear to be two of the leaders in the change from cash based societies to entirely digitalised ones. Meyer and Taper have noted that ‘Market observers have recently hypothesised about cash being eventually marginalised by alternative digital payment options considering rapid technological change’ (Meyer & Tepper 2024, pg. 3).
However the discourse globally regarding a shift away from cash includes many differing perspectives, with not everyone necessarily being in favour of this change.
In the argument for a cashless economy, many argue that digitalised methods of payments bring more convenience for consumers, making all payments more accessible and easy to complete, which in turn may increase overall consumption and aggregate demand.
Furthermore, Filipiak has detailed that digitalised payments and online banking are beneficial for all main economic actors, that being consumers, producers and governments. They have argued that the benefits of a digitalised economy are; increased security, more chances of detecting fraud, higher levels of tax enforcement and the amount of data that can be collected through online payment services and banking (Filipiak, 2024). Consumers are left with a secure manner in which to store their money, usually having to follow multiple security procedures to have access to, such as the rise of face ID now as an added security measure. Furthermore, both producers and governments may also benefit from digitalised payment systems and cashless practices. The benefits for both economic actors occur through the ability to manage and track payments, leading to further data and information collection.
However, a cashless economy may also entail added costs for consumers, producers and governments. With the rise of digital production and innovation, there has been increasing levels of cyber crime and issues related to hacking. There have been multiple significant reports over the last 20 years of governments detecting attacks on national digital infrastructures, leading to an increase in economic crimes and hacking cases (CSIS, 2024).
Moreover, if all procedures are heading for a solely digital reform, the chances of further cyber attacks and hacking would increase. Additionally, the Economist notes that ‘electronic payment systems may be vulnerable to technical failures, power blackouts and cyber attacks’ (The Economist, 2019). There have been multiple reports regarding IT outages of major British banks over the last few years resulting in customers failing to access their online accounts, resulting in hundreds of thousands of pounds needing to be paid back in compensation. Fraser (2025) has highlighted that these banks such as Barclays, Lloyds, Santander and Natwest have ‘accumulated at least 803 hours – the equivalent of 33 days in tech outages in the past two years’. This thus brings to attention one of the possible issues that may occur if economies globally were to rely solely on digital banking, and the risks that occur when all funds are stored in a system dependent on the efficiency of IT systems.
To therefore move to an entirely cashless economy, online banking organisations would need to aim to ensure secure and well programmed services offered to all economic actors, preventing technical failures or cyber attacks.
The Economist article also details that ‘in a cashless economy, the poor, the elderly and the country folk may be left behind’ (The Economist, 2019). Governments must invest in digitalised currencies or systems that are inclusive for the entire population, and an issue that arises through this is making sure that individuals have access to digital devices, bank cards and stable internet connections. In 2023, The British Government produced an article noting that 7% of individuals in the UK did not have access to the internet in their homes (Clark, Baker and Carthew, 2023).
Furthermore, of the 7% of households without internet access, a large percentage of those were in band’s D/E in terms of socio-economic status, and over the age of 65. The United Nations have set the goal of each person globally having ‘safe and affordable’ internet access by the year 2030 (UN, 2024). Therefore if there were to be a global shift in cheap or universal internet access, this may alleviate the financial strain for individuals switching to a cashless society. Furthermore governmental organisations would need to take it upon themselves to make sure that individuals are well educated in using cashless alternatives, and the tools needed should be state provided.
Moreover, there are multiple costs and benefits to an entirely cashless society. The benefits of a digital economy are; convenience, security, enhanced abilities to track criminal activity, and stricter tax payment enforcement. There are differing arguments presented as to whether or not a digital or cashless economy would reduce inflation levels dramatically. The International Monetary Fund has argued that a shift towards an electronic money standard could lead to a lower global inflationary target, however they note that this is not coupled with the eradication of cash, merely a tightened use of digital services (Agarwal & Kimball, 2022). Therefore a cashless economy may not lead to a zero target inflationary goal, however it is accompanied by many benefits.
However, addressed above are also the possible negative outcomes associated with a cashless economy, such as the threat of cyber attacks and that many members of society could find themselves left behind after a digital revolution against physical cash.
Conclusion
This article has explored the idea of a cashless Europe, drawing upon data from European nations who are currently the closest to reaching an entirely digitalised economy. The two states explored in this essay have been Sweden and Finland, who have seen a decline in the demand for physical cash, and instead are swapping to online forms of banking or the use of debit/credit cards. This change in demand appears to be the most prominent with younger consumers, who appear to have adopted cashless methods more than other age groups.
Furthermore there are clear correlations between individuals’ trust in their governments and how close they are to becoming a cashless economy. In the nation states where there has been a shift towards digital banking, there are also stronger levels of trust in the government, which may therefore be a necessary factor in a digitalised economy. There are positives and negatives involved in a cashless future. The eradication of cash may lead to safer and more secure payments, a reduction of crime and allows businesses to track payments and consumer details more easily. However, there are notable costs to a cashless society also, with older and less affluent social groups being disproportionately affected by such changes and the risks of cyber security threats and data loss.
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Recommended citation:
Hunter, S. (2025) Is the Future of Europe Cashless?, IDRN, 3 April. Available at: https://idrn.eu/is-the-future-of-europe-cashless/ [Accessed: dd/mm/yyyy].