Chapter 2

INTRO

Yu, and Ku (2001) stated that electronic commerce (EC) provides numerous
advantages over traditional commerce such as openness, speed, anonymity and Commented [NGE1]: The determinants of electronic
global accessibility, which simplify life and increase individuals’ quality of life. payment systems usage from consumers’ perspective

But before we see how digital payments influence consumer behaviour and
organisations:

1. What influences the consumer decisions when paying?

- Practice: I need to give all connected technology around me the authorization to

act: my car, my lock, my home. Commented [NGE2]: https://www.pwc.se/sv/pdf-
reports/a-borderless-society-2025-eng.pdf

To take control: In addition to pure payment services, auxiliary services have also arisen, such as those
compiling information from online or mobile banking services and thus providing the user with a clearer view Commented [NGE3]: sveriges riksbank rap pov article
of a household’s economy.

"Today, everything is about the smartphone, so it's only natural that methods have
been developed to replace the physical options. Peer-to-peer payment solutions, such Commented [NGE4]: https://eurocard.fi/en/paysmart/ar
as Swish on the Swedish market, is a good example of a gap being filled. Now there are ticles/the-digital-wallet-of-the-future-is-already-here/
even more solutions that make it possible to pay with your phone”, says Catharina
Hoffsten.

Increased Speed and Convenience: E-payment is very convenient compared

to traditional payment methods such as cash or check. Since you can pay for
goods or services online at any time of day or night, from any part of the world,
you don't have to spend time queuing in banks or merchant offices waiting for
your turn to transact. Nor do you have to wait for a check to clear the bank so
you can access the funds. E-payment also eliminates the security risks that
come with handling cash money.

- Security: The individual’s expectations of having control over their technology

and its processes are increasing, as is the need for us to be able to control the
surrounding infrastructure. I want to authorize my refrigerator to purchase and
pay and similarly give my partner access to my bank account. I want to control
where and how information about me is used. I need power of attorney to act on
behalf of my close friends and family.

Payments go digital and fraud follows: An (almost) cashless Sweden sees card fraud rising.
However, the general safety of both cash and cashless transactions in Europe is high. Commented [NGE5]: Cash, freedom and crime Use
and impact of cash in a world going digital
, Articulo Deutsche Bank
Cash is often blamed in Sweden as being the primary generator of criminal activity.
Does the customers fill more secure with credit cards?

Figures on crime and criminal cash usage are scarce and often imply the use of estimates.
Nevertheless, the available evidence suggests that restrictions on cash use will probably reduce
for-profit crime but will certainly not eliminate it.

Security related with trust

Based on the literature review, four factors that influence consumers’ perception of security and
trust in EPS have been identified. These factors are security statements; transaction procedures; Commented [NGE6]: The determinants of electronc
technical protection and personal past experience with EPS. payment systems usage frim customers perspective

4 factors that affects security:

Security statements:, authentication, fraud prevention confidentiality, divisibility, transferability,

duplicate spending prevention, payment privacy, payment anonymity, and payer traceability.

personal past experience: past experience is recognised as another influencing factor for
the use of EPS.

- Payment habits

The importance of digital media in Sweden:

The Swedish consumer is driving the digitalization of the economy, and is now rapidly
becoming familiar with using mobile devices to access the internet and make online Commented [NGE7]: http://image-src.bcg.com/Digital-
transactions Sweden-May-2013-Nordics_tcm22-29085.pdf

Swedish consumers continue to adopt new behaviors to exploit the proliferation of

connected devices and applications, encouraging the nation’s entrepreneurs to
experiment with new products and business models that leverage the power of a
globally integrated internet economy. The result is a promising environment for digital
development that supports the many global leaders and local champions pioneering the
opportunities created by the emerging digital economy

Swedes derive a significant amount of value from their consumption of digital media,
getting six times more value-for-money than from traditional forms of media

Web and mobile channels are rapidly emerging drivers of consumption as consumers
shift their spending from more traditional channels. T

BCG conducted a study11 released in April of 2013 to determine the value to

consumers across nine countries, including Sweden, of their online activities. The
results suggest that Swedes already value their digital media almost as highly as more
traditional forms, deriving SEK 13,800 of value from online content, versus SEK
15,400 from traditional media. However, to harvest such a bounty of online content,
they paid only one-sixth as much (SEK 600) as for an equivalent basket of traditional
media (SEK 3,800). This means that the consumer surplus (the difference between
value received and price paid) generated from online media is significantly higher in
both absolute and relative terms.

The percentage of consumers who shop online in Sweden is the highest of the Nordic
countries, and Swedes have proven to be willing to try new tools to streamline their Commented [NGE8]: E-commerce in Nordics
purchases and simplify daily life. For example, more than four out of ten online shoppers
made an average of at least one purchase by cell phone per month in 2017, which is a
clear increase compared with the previous year. In addition to the actual purchase, cell
phones were regularly used to research products, find stores and even check inventory.

Their digital payment infrastructures are well developed, and Nordic people are
typically early adopters of new technologies, keen to exploit innovations. Commented [NGE9]: nordea

- Age

- Income
- Transparency: it offers in terms of personal cash management. (mas transparente,
estas mas al tanto de lo que te gastas). Commented [NGE10]: Cash, freedom and crime
Deutsche Bank
Having a record of all my transations. Help managing budget.
https://www.experian.com/blogs/ask-experian/survey-findings-how-do-consumers-feel-about-
credit-cards/

Just over four out of ten Swedish consumers state that they have shopped online with a
cell phone compared with just over one third in the Nordic region overall. Swedish Commented [NGE11]: Ecommerce in the Nordics 2018
consumers also stand out for using their cell phones to a high extent as a tool in the
purchasing process – for example, to search for product information or check inventory
status.

POSITIVE INFLUENCES IN CONSUMERS

- Consumers have benefited from mobile technology by having a broader

field of comparison for products and their shopping is not limited to a Commented [NGE12]: Cash, freedom and crime
particular city or country. Deutsche Bank

E-commerce and mobile technology have worked together to provide users

with access to a vast catalog of products and services around the world without Commented [NGE13]: Cash, freedom and crime Use
the need of an intermediary (Disintermediation). Disintermediation has and impact of cash in a world going digital
, Articulo Deutsche Bank
enabled new forms of commerce that do not require a physical space (involving
a large investment), allowing consumers to buy directly from producers
[Graham 2008: 2].

- Reduced Transaction Costs: While there are no additional charges for

making a cash payment, trips to the store typically cost money, and Commented [NGE14]: Fintech: the digital revolution in
checks also need postage. On the other hand, there are usually no the financial secto
fees – or very small ones – to swipe your card or pay online. In the long
run, e-payment could save both individuals and businesses hundreds to
thousands of dollars in transaction fees.

- The interaction between users and the Internet is another factor that
promoted the Internet as a valid trade system.

- Make more practice the payments not only C2B but also C2C.
 - For suppliers: (i) lower operational costs and risks from cash collections; (ii)
better ability to provide short-term liquidity to retailers and managers, or enable
a bank to better manage credit to retailers; (iii) enhanced infrastructure to
manage marketing promotions, loyalty schemes and sales incentives; and (iv)
less frequent need for retailers to place large orders – For PSPs and
collaborators: 8 (i) fee income from either payment or adjacent services
(financial and nonfinancial); (ii) opportunity for cross-selling; (iii) enhanced
ability to monitor performance with retailers; and (iv) opportunity for
collaborators to earn part of the overall revenue or sell adjacent services

NEGATIVE INFLUENCES IN CONSUMERS

- Dejas huella, pueden saber en todo caso lo que estas comprando Commented [NGE15]: Cash, freedom and crime Deutsche
Bank
Cash leaves hardly any traces, but cashless funds and payments do. While the information
accompanying electronic transactions traditionally only used to facilitate the payment execution,
it is now a valuable by-product. Modern data analytics allow the extraction and collection of
information specific to an identifiable user, which will enable the data processor to approach the
consumer with product and service offerings tailored to his (perceived) needs. Companies are
interested in this data in order to make their advertising more relevant and thus to raise their
sales. Data has become an economic good for which the (unwitting) “producer” is usually not
remunerated.

The most robust data protection is provided by cash, as no data is generated at all.

The voices calling for a limitation or abolition of cash usage argue that tighter and more
comprehensive state control over individuals’ financial flows and funds will fight crime
effectively. However, the shift to transparent and traceable electronic funds with no easily
available option left to pay anonymously can open the door to data abuse and infringement of
civil rights. Moreover, this approach carries a flavour of incriminating citizens without fact-based
suspicion which will hardly strengthen trust in public institutions.

We interview Patrik Andersson, CEO of Loomis,: “In today's society, anonymity is a

scarce resource, especially when it comes to payments. All payments you make, such as Commented [NGE16]: nordea
with your card or your phone, are traceable. Not everyone is comfortable with this.”

- Consumerism

Not only does consumerism structure our everyday lives, but it does so by offering
us the illusion of consumer freedom when, at least to a certain extent, such
freedoms are inevitably constructed and constrained” [Miles 1998: 5] Commented [NGE17]: The Impact of Technology on
Consumerism David Naranjo
Graduate Center, City University of New York
Credit card usage has been associated with compulsive consumption among young
consumers (Norum, 2008). Therefore the subject should be considered relevant to
organizations and government where the main issue to be considered is how to prevent,
via educational programs for instance, or reduce compulsive consumption behavior. Commented [NGE18]: Do Digital Wallets as a Payment
That is described as the “credit card effect” as referred by Feinberg (1986) as the effect Method Influence Consumer in Their Buying Behavior?
of credit card acting as a “spending facilitating stimuli”.

Some of the reasons for that to happen is that payment modes such as credit cards do
not have the cash outflow vividness, therefore attenuating the pain of payment that one
experiences while in a paying transaction. Hirschmann (1979) suggested that consumer
behavior could be affected and associated by the differences in characteristics of the
alternative payment systems; her studies have provided evidence that consumers
evaluate credit card by salient attributes and that people who own more credit cards
make larger purchases per department store visit;

Pain of payment is a concept related to the “credit-card-effect” and it is about the

immediate pain experienced when individuals are purchasing goods or services

They also found that credit card usage increase the willingness to pay. Moore and
Taylor (2011) studied the effect on payment mode on willingness to spend and their
experiment presented evidence that spending in the credit card condition is much higher
than in the cash one.

Studies also found that credit card foster increase of non-essential products purchases
(Soman, 2003); and that it acts as lifestyle facilitators (Bernthal, Crockett, & Rose´s,
2005). It is also argued that the physical form of the payment mode influence consumer
behavior resulting in it being treated as “play money” (Chartterjee & Rose, 2012;
Srivastava & Raghubir, 2008). These evidences strongly support the increase in
purchasing probability when an individual is using a credit card. Among other reasons,
the relative less salience experience and the fact that expenditures will be less recalled
are some explanations for that increased probability and expenditure eliciting (Soman,
2001).
On the other hand, studies show that credit card usage, results in less hedonic impact
(pain) (Soman, 2001), i.e. credit cards have lower pain of payment, when compared to
cash, and among a few explanations, that is due to aspects such as it decouples
payments from benefits (Soman, 2001), and fact that the physical form of the credit card
makes it feels like using “play money” (Chartterjee & Rose, 2012; Srivastava &
Raghubir, 2008).

The pain of payment influences negatively the purchasing spending amount.

The cell phone has fundamentally changed consumer behavior within both e-commerce
and physical commerce in just a short period of time. It serves not only as a purchase Commented [NGE19]: Ecommerce in the Nordics
channel, but also as a source of information. In part, it provides information that
consumers themselves actively seek out, but also acts as a channel for receiving offers
via text message, e-mail, and advertising, for example. Cell phones are often a
consumer’s most readily accessible device, and many e-commerce businesses have been
quick to develop customized sites and apps to suit phones’ smaller screen sizes.

studies conducted in other controlled environment utilizing experiments are able to

confirm the effects of the subjectivity associated with payment methods, in particular Commented [NGE20]: Do Consumers Pay More Using
the forms, and found that the presence of a credit card logo only can induce higher Debit Cards than Cash
willingness of paying (Feinberg, 1986; Raghubir and Srivastava, 2008). In another vein,
Chatterjee and Rose (2012) find that credit cards seem to prime consumers to think
about benefits of products while cash activate costs considerations. They suggest that
since credit cards separate payment (and thus the pain of paying) from consumption,
repeated use of credit cards reinforces the positive feelings of purchases while the
immediate pain felt with cash reinforces cost considerations.

The concept of “pain of paying,” advanced by Prelec and Loewenstein (1998), has been
argued as the theoretical explanation for why spending may be higher with different
payment instruments than with cash. The pain of paying idea suggests that when paying
for 6 consumption, consumers experience an immediate pain when parting with money.
The less transparent the payment is (the less the payer feels the outflow of money), the
less painful it is to pay. Soman (2003) defines the transparency of a payment method as
the salience of parting with money.

consumer loose some control over their spending. Payment with cash is salient as
consumers see how much that is deducted from the available sum when they pay. When
paying with, for 17 instance debit cards or credit cards, there is no such feedback
mechanism automatically included in the payment instrument. Consequently, there may
be a need to develop feedback mechanisms, such as feedback on transactions and the
available funds. This could be operationalized partly through text messages on mobile
phones or in displays in next generation of payment card

- Security Concerns: Although stringent measures such as symmetric

encryption are in place to make e-payment safe and secure, it is still Commented [NGE21]: https://bizfluent.com/info-
vulnerable to hacking. Fraudsters, for instance, use phishing attacks to 8188352-advantages-disadvantages-epayment.html
trick unsuspecting users into providing the log-in details of their e-wallets,
which they capture and use to access the victims' personal and financial
information. Speaking to Information Security Media
Group's BankInfoSecurity.com, Scott Dueweke, a payment systems
consultant, notes that inadequate authentication also ails e-payment
systems. Without superior identity verification measures like biometrics
and facial recognition, anyone can use your cards and e-wallets and get
away without being caught.

Although stringent measures such as symmetric encryption are in place to Commented [NGE22]: https://bizfluent.com/info-
make e-payment safe and secure, it is still vulnerable to hacking. Fraudsters, for 8188352-advantages-disadvantages-epayment.html
instance, use phishing attacks to trick unsuspecting users into providing the log-
in details of their e-wallets, which they capture and use to access the victims'
personal and financial information. Speaking to Information Security Media
Group's BankInfoSecurity.com, Scott Dueweke, a payment systems consultant,
notes that inadequate authentication also ails e-payment systems. Without
superior identity verification measures like biometrics and facial recognition,
anyone can use your cards and e-wallets and get away without being caught.
 - Division of the population:

DEMOGRAPHy ALSO AFFECTS DEMAND

Demand for payment services is affected by demographic factors, with there being two dimensions worth
emphasising within the shift towards electronic payment services described above. The first of these is the Commented [NGE23]: rap pov artikel; sveriges riksbank
segregation of demand by age, which is to say the difference in how different generations use payment
services seems to be increasing. Older people who are used to using cash and paying via paper-based direct
debit continue to use these payment services to a greater extent than younger people. 20 Older people also tend
to have less access to the Internet, smart telephones and tablets and, additionally, to use these less. 21 younger
people tend to use cards and online or mobile banking to a greater extent.

The second is geographical segregation. Sweden is a sparsely-populated country. By surface area, Sweden is
the third-largest country in the EU but we have the second smallest population per square kilometre. Sweden’s
population is also concentrated to an increasing degree in the metropolitan regions and, as a rule, the average
age is increasing most in
the counties with declining populations. This means that it is in the cities that demand for electronic payment
services is growing most rapidly, particularly as regards new, innovative payment services. This means that
cash and paper-based payment services are demanded to a higher extent in the countryside, although demand
for cash is falling in some areas as the population diminishes.

Companies

Consumers are encouraged to buy things from across the globe with moderate and
comprehensible waiting times and prices. A sense of immediacy has led inventors
and entrepreneurs around the world to develop ideas to close the gap between
time, space and the economy. Over the past 20 years, the term “mobile” has
become a synonym for portability, a technology that is not limited by physical
boundaries [Kaufman-Scarborough 2006: 63]. Commented [NGE24]: The Impact of Technology on
Consumerism David Naranjo
Graduate Center, City University of New York

While Payments and Trading & Banking Technology may be more ma- ture due to large
volumes of investments and attention, new entrants to the FinTech scene have now Commented [NGE25]: stokholm fintech, An overview of
appeared in almost every segment (figure 10). The total number of companies in 2014 was the FinTech sector in the greater Stockholm Region
68, an increase from 63 in 2013. There has been particular activity in the Cryptocurrency
and Innovative Lending segments

E-commerce is shifting the way people purchase their goods and services and
affecting the relationship between technology and society. Consequently, Commented [NGE26]: The Impact of Technology on
traditional retailers, aware of the inevitable change, have developed strategies to Consumerism David Naranjo
Graduate Center, City University of New York
keep up with the continuously evolving marketplace. These strategies vary from
creating virtual stores (i.e., websites) and developing digital social networks to
data mining and spamming.
Electronic commerce, more popularly known as e-commerce, is the process of
using electronic devices and interconnected technologies (e.g., the Internet) to sell,
purchase, transfer, or exchange products, services, and/or information between
businesses and/or people [Manzoor 2010: 2-3].

The growing penetration of modern internet technologies gives rise to new market entry
opportunities, especially for technology providers. The lucrative opportunities for the new Commented [NGE27]: Fin Tech the digital revolution in
players in turn ramp up the competitive pressure on the established players. Due to digitisation the financial sector
the established companies find themselves being exposed in some areas that could also
develop into Achilles' heels. They provide fast-growing internet firms with the opportunity to
occupy certain market niches in order to a) monetarise their digital content and b) make their
own range of products more attractive to an even wider public. For some time internet
behemoths have been putting out their (digital) feelers across numerous sectors, investing
billions of euros, experimenting in a variety of markets, also outside their core business, and
offering new business models. For example, the search engine group Google is now active in
the home technology segment, in the automotive sector and in (humanoid) robotics.

Supply changes in two main ways – through the services supplied and the suppliers. The new technology,
consisting primarily of the Internet, tablets and smart telephones, is not just contributing to changing demand Commented [NGE28]: Rap pov artikel sveriges riksbank
but also to the creation of new channels though which payment intermediaries can provide payment services
to their customers. This technology makes it increasingly simple to integrate payment services into purchase
situations and a number of payment services aimed at e-commerce in particular have arisen. Card terminals
have become portable and increasingly accessible, making it easier to pay by card in different situations. More
and more companies are offering their customers the possibility of paying via electronic invoices.

Benefits of cashless transactions

- A card removes the liquidity restriction posed by cash in a purse. This is a strong case
for merchants to provide the infrastructure to accept card payments. Commented [NGE29]: Cash, freedom and crime
Deutsche Bank
- merchants have a clear incitement to promote none-cash payment, since it might
induce more spending from the customers, which could lead to higher revenues.
Another argument is that cash is much more expensive to manage for merchants
(Garcia-Swartz et al., 2006) and such expense is expected to increase further
(Nationalbanken, 2014) Commented [NGE30]: Do Consumers Pay More Using
Debit Cards than Cash

- Payments via mobile telephone in shops may be attractive for retailers if, for example, other
information such as additional offers or advertising can be linked to the payment application. No less Commented [NGE31]: Sveriges Riksbank; rap pov article
important is that this makes it easier for companies and/or payment service suppliers to gather and
process data concerning their customers and thereby be able to tailor offers and advertising for each
individual customer. Such information can also be sold to other companies, thus providing extra
income.

-
The infrastructure needed, though, is a drawback for card payments: private persons
48
cannot receive them because they lack this infrastructure. Thus, P2P (proximity)
 payments are overwhelmingly cash payments. New providers and industry initiatives
49
are targeting P2P payments with mobile instant payment solutions. Commented [NGE32]: Cash, freedom and crime
Deutsche Bank

- Sweden ranks 4th among EU countries for business digitisation and eCommerce
activities, after Denmark, Ireland and Finland. Swedish businesses are using
digital technologies to improve their efficiency and productivity, as well as to
reach customers and improve sales. They are more and more adopting cloud
computing, using electronic invoicing and social media to communicate with
their customers and their turnover from selling online is increasing. However,
compared with Finland (72%) and Denmark (64%) eInvoicing is only used by
33% of enterprises. Finnish companies (40%) also use cloud services more than
Swedish ones (33%). Sweden is one of the most competitive economies21 in the
world with a strong business environment and a thriving startup community Commented [NGE33]: file:///Users/noeliagarciaespi/Dow
nloads/SwedenEDPRcountryprofile%20(1).pdf

Increased trading via Internet shops (e-commerce) is also giving rise to demand for suitable payment services Commented [NGE34]: Rap pov artikel; the swedish
and auxiliary services.18 Examples of such services include services in which a third party goes between the payment market in transformation
customer and the retailer and assists the customer make a payment in a faster and simpler manner. This
intermediary can mediate payment information to the customer’s online bank, thereby meaning that the
customer has to provide less information – this is usually called a Direct payment on the Swedish e-commerce
companies’ websites. It can also manage sensitive information such as card numbers, expiration dates and
security codes so that these cannot be seen directly by the retailer. PayPal is an example of this type of
intermediary. The use of electronic services such as downloads or streaming of music, films, audiobooks and
so on may also require the use of specially-adapted payment services. E-commerce increasingly takes place
across national borders, meaning that demand for suitable cross-border payment services is increasing.

Lee, Yu, and Ku (2001) stated that electronic commerce (EC) provides numerous
advantages over traditional commerce such as openness, speed, anonymity and
global accessibility, which simplify life and increase individuals’ quality of life.
These advantages boost the popularity of EC and enhance the competitive edge of
the companies which adopt it. Commented [NGE35]: The determinats of electronic
payment systems usage from customers perspective

Many entrepreneurs have seen the potential of mobile technology as a tool

to improve consumerism and produce wealth.

- The cell phone has fundamentally changed consumer behavior within both e-
commerce and physical commerce in just a short period of time. It serves not Commented [NGE36]: Ecommerce in the Nordics
only as a purchase channel, but also as a source of information. In part, it
provides information that consumers themselves actively seek out, but also acts
as a channel for receiving offers via text message, e-mail, and advertising, for
example. Cell phones are often a consumer’s most readily accessible device, and
many e-commerce businesses have been quick to develop customized sites and
apps to suit phones’ smaller screen sizes.
 - Swedish companies benefit from a well-developed infrastructure, the excellent
reputation of Swedish-made goods worldwide, and high trust in modern
payment solutions among the domestic population.

La infraestructura necesaria para los metdos de pago sin dinero necesita una
infraestrucutra q normalmente no tienen las personas fisicas. Nuevas empresas han
aparecido para satisfacer estas necesidades y que las personas puedan pagarse entre si
gracias a estos métodos.

- For retail merchants: (i) security: cash is more liable to theft, loss and fraud; (ii)
better and faster ability to assess the health of their business operations (e.g. cash
flows, profit and loss) through synergies with e-payments; (iii) ability to
generate revenue from new channels and digital financial services (if they keep
balances with banks and other PSPs); and (iv) value-added services that come
bundled with payments, or for making or receiving payments (e.g. loyalty,
credit, marketing support)

- They can arrive to more customers thanks to online payment: (with cards) related with
ecommerce. Commented [NGE37]: Fintech: the digital revolution in
the financial sector
Network effects and economies of scale are supplementary economic drivers in the digitisation
process. In an internet economy there is not only bound to be direct competition between
individual digital goods and services, but also competition between the individual systems that
are marketed especially by internet platforms. They are also described as digital ecosystems.

The Nordic trends reflect the development that incumbent companies are starting to take
very serious steps to cope with the impact caused by the rise of FinTechs. Many
incumbents are exploring various collaboration methods with FinTechs, VCs and
external advisors to find the appropriate ways to cope with the change. Commented [NGE38]: Fintech in the Nordics: Deloitte
review

- The banks have had a dominant position on the payment market for a long time. But rapid
technological developments and demand for tailor-made payment services have led to other kinds of Commented [NGE39]: Rap pov artikel sveriges riksbank
company becoming established and starting to offer their services, either in competition or in
cooperation with one or more banks. In Sweden, Payex, klarna, iZettle and Seamless are examples of
such companies. In the international arena, PayPal is another example. In other cases, they are
companies with other core activities but who provide payment services as a complementary product.

- The mobile phone makers have an advantage in that mobile devices are
becoming a truly key feature in the lives of modern humans. It is hard for most Commented [NGE40]: nordea
of us to imagine everyday life without them now. Since we use them so widely
and intensively, the onus may increasingly be on alternative payment platforms
to prove why we should use them instead when we are already using our phones
for so much else.
Disadvantages of cashless transactions

- Merchant acceptance of payment method is obviously a critical element, which

has been found to be influential on payment choice (Rysman 2007). For Commented [NGE41]: exploring consumers payment
example, as merchants are billed for every card transaction, some merchants do behaviors
not accept cards if the amount is small (Talls & Trinh 2012).

- Payment costs do matter, though, for merchants and banks which have to bear the
transaction costs.

Businesses that deploy sophisticated digital tools are able to achieve higher growth and Commented [NGE42]: http://image-src.bcg.com/Digital-
better profitability, but many Swedish SMEs still struggle to effectively identify and Sweden-May-2013-Nordics_tcm22-29085.pdf
implement elements of the digital toolkit that would unlock this potential.

Businesses gain visibility over their transactions in real- time, and lose the
administrative burden and cost of handling cash (in the US, Harvard
Business Review reports that businesses lose $40 billion of cash to theft
alone, each year). They are able to provide a highly secure, personalized
environment for their customers to transact in, and coupled with this, a
payment experience that is far superior than using cash in terms of speed,
convenience, and confidence. It’s no surprise then, that we are seeing such
a push from businesses to not just move to an ecommerce presence, but
also to apply digital payment methods across other channels, such as social
media, and even to bring digital payments into the offline world.

- Based on our experience, businesses that adopt digital payments

Commented [NGE43]: https://telr.com/adopting-
consequently find themselves able to change their business models, cashless-payment-channels-will-double-business-growth/
scale up and expand into new revenue streams. In the long term,
cashless processes enable the margins of these businesses to grow
by an expected 2-3x. It goes without saying, though, that this
potential is only realized where it’s supported by consumer
adoption. For the consumer adoption to accelerate to levels we see
elsewhere in the world, the participants in the region’s digital
payments ecosystem need to create an environment that drives
 consumer confidence through security and a demonstrable ability to
minimize online frauds –changing the cash-focused mindset.

Traditional merchants:

- According to a report by CNN Money, many e-business owners did not

realize they had similar needs as traditional retailers in order to work in the Commented [NGE44]: the impact of technology on
digital world, from infrastructure to warehousing. Garage-entrepreneurs consumerism
did not plan ahead the quick expansion of their businesses. They also
overpassed costs of customer acquisition and started to realize that they
were not unique when traditional retailers such as Walmart started
creating their websites and became a better-prepared competition
[Kleinbard 2000]. However, not all traditional retailers were prepared to
compete in the electronic marketplace.

Since 70 percent of all retail transactions in Sweden are by card, both debit and credit, it adds
up to a sizable sum. Commented [NGE45]: https://www.thelocal.se/2013120
8/cash-falls
Retailers include the fee in the prices of their products, but for smaller shops it's a problem
because they don't have the economies of scale and thus have a hard time keeping prices low.

For reasons such as these, Swedish money is not about to go completely virtual.

The Riksbank, which having been founded in 1668 is one of the world's oldest central banks,
still plans to launch new banknotes and coins in 2015.

"We believe cash will continue to exist in the near future. We can't foresee it disappearing
completely," said Christina Wejshammar, head of the banknotes and coins division at the
Riksbank. "It all depends on how we act as consumers."

Cash circulation is decreasing rapidly in Sweden, but it's been causing

a headache for some small businesses. The Local meets with some of Commented [NGE46]: https://www.thelocal.se/2015031
those affected in Stockholm ahead of a key debate in parliament later 7/small-businesses-seek-help-in-cashless-swedenn

this week.

some of the main critics of the cashless trend have warned that it is a
development that could end up excluding the elderly and disadvantaged
people living outside the banking system.

“Yes, definitely. We pay high card transaction costs. I haven't checked how
much, because I don't dare finding out, but it's not free. We've been fighting this
for a long time, but we have no choice – offering the possibility to pay by card is
part of customer service.

Conclusion

In summary, the supply of payment services over the last 10-15 years has shifted towards electronic payment
services that are increasingly tailored to and integrated with the purchase situation. These are increasingly
provided by companies that are not banks. The diversity of supply has thus increased and has, to a certain
extent, fragmented the market. In contrast, the supply of cash services and paper-based payment services has
decreased.

This structural transformation is generally positive. New payment services and new operators increase
competitiveness and broaden supply, which, in turn, results in simpler, cheaper and, in certain cases, also
more secure and user-friendly payment solutions.
This increases choice for users and can also lead to higher profitability for associations
and smaller companies (for example) in that they have more payment options to offer customers. For instance,
there are now new payment services that can, in many situations, replace cash in communities where the
customer base or logistical problems make cash payments unprofitable.

Even if the development is positive, it involves challenges and certain households, associations and companies
perceive it as negative. The existence of alternatives to cash is of little comfort to those with a strong desire to
pay in cash or without access to or ability to use alternative payment services.

the crux of the problem lies: not having access to or

an ability or interest in using new electronic payment services is part of a greater digital exclusion and it may
thus be difficult to solve this problem by introducing new technology.