The use of cash as a payment instrument has been experiencing a steady decrease in some countries such as Sweden, while Canadians have also been enthusiastic about adopting new payment technologies. The Bank of Canada recently published a discussion paper, A Tale of Two Countries: Cash Demand in Canada and Sweden, which studies the use and the demand for cash.
First, let’s have a look at why Canada and Sweden were used as the point of comparison. Although thousands of miles apart, these countries are similar in more ways than one would think:
Throughout the paper’s in-depth analysis, researchers Walter Engert, Ben Fung and Björn Segendorf explain the differences between each country’s transactional demand for cash (for payments) and the store-of-value demand (for times of economic uncertainty and negative interest rates) that portray interesting results:
Both Canada and Sweden have experienced a long-term decline in the demand for small-denomination notes, as illustrated in charts 5a and 5b above, reflecting declining transactional demand for cash in both countries. This evolution is related to both consumer behaviour as well as merchant policies towards both cash and non-cash payments. However, in Canada, demand for large-denomination notes has continued to grow while this has not been the case in Sweden.
It is worth noting, nonetheless, that the situation has evolved recently in Sweden, as
The paper points to three broad lessons:
Read the full report here: