Norway has lowest physical cash use in the world, says report

The use of cash in Norway has plummeted during the Covid-19 pandemic, and its central bank believes cash is used less as a proportion of total spending than in any other country.

A survey from Norges Bank has revealed that less than 4% of spending in the country was made using cash in the autumn months this year.

“Only 4% of payments are now made using cash,” said Ida Wolden Bache, executive director for monetary policy at Norges Bank. “This share is approximately the same as in spring, and considerably lower than before the pandemic.”

Norway and fellow Nordic country Sweden are often cited as the countries closest to being cashless, and the Covid-19 pandemic might have accelerated the journey. “To our knowledge, the share of cash payments is lower in Norway than in any other country,” said Wolden Bache.

Major events, such as the current pandemic, bring changes in consumer behaviour – for example, had it not been for the global financial crisis of 2008, many of today’s financial technology (fintech) companies might not be around. It was a combination of traditional banks cutting back their services and consumers looking for alternatives that built an audience for fintech.

Due to the risk of spreading Covid-19 through contact, the use of cash has reduced dramatically across the world wherever there are alternatives.

Once people get used to using alternative payment methods such as mobile wallets and contactless cards, they are unlikely to go back to cash.

According to Norway’s central bank, contactless and PIN-less payments are increasing sharply. “Three out of every four card payments are now contactless payments,” said Wolden Bache.

She added that mobile payments are also surging: “An increasing number of smartphone apps can be used to make payments in shops. Online shopping is growing, and payment is increasingly made via smartphone apps and other digital wallets.”

But while new payment methods are increasing the efficiency of the payment system by simplifying and speeding transactions, the central bank wants to ensure through regulation that digital payments are not dominated by a few large companies.  

“The payments market is characterised by scale and network advantages. We must therefore be vigilant to developments whereby some operators – domestic or global – gain market power that weakens competition,” said Wolden Bache.

She also warned that competition could be stymied by the global technology companies involved in the payment system. “Some companies such as Amazon, Apple and Facebook also control shopping and social network platforms, often offering services on the platform in competition with other operators,” she added.

Wolden Bache said this could restrict competition, including in payments, if left unregulated. “There is a risk that users will be locked in and that the range of payment options will be reduced over time,” she said, adding that the central bank will focus on interoperability across systems and operators to reduce this risk.

There is a rich fintech ecosystem within the Nordics, with a particularly strong focus on payments, including Klarna, which has developed partly because of the openness of people in the region to new digital payment methods.