As unintended consequences go, this could be a big one.
Demand for cash around the world is at a 20-year low, according to De La Rue, the company that prints Britain’s banknotes. But fear of war with Russia as well as other unintended consequences of driving cash out of the economy is prompting some of Europe’s most cashless economies to rapidly reverse course.
A few days ago, The Daily Telegraph published an article warning that “Going Cashless Risks Playing Straight into Putin’s Hands.” As its title suggests, the article’s premise is that the West’s accelerating shift from physical money to digital transactions “may be leaving nations exposed to Russian cyber-attacks”:
Swedish families have this week received an ominous yellow leaflet. The cover shows an illustration of a female soldier with an assault rifle. In big black letters it says: “If crisis or war comes”.
The leaflet contains information on everything from how to deal with anxiety, how to staunch a bleeding wound and what to do if an air raid alarm sounds.
It also urges inhabitants to keep enough cash on hand for a week of essentials “preferably in different denominations” and to “use cash occasionally”.
The Swedish Civil Contingencies Agency, which is behind the brochure, says it will increase citizens’ “emergency preparedness”. Norway, Finland and Denmark have published similar guidance in recent months.
It is a significant shift for a group of countries that were on the cusp of going totally cashless.
Russia’s invasion of Ukraine has brought the threat of cyber attacks, sabotage and outright war closer to home in the Nordics. Payments networks could be a potential target.
Stash Cash in Case of a “Crisis or War”
Back in 2018, the then-deputy governor of Sweden’s central bank, Cecilia Skingsley, predicted that Sweden would probably be fully cashless by 2025. We are now less than a month from the start of that year yet rather than pulling the plug on cash, Sweden’s central bank is instead warning about the unintended consequences of driving cash out of the economy.
Those unintended consequences include exposing the country’s payments system to heightened risk of cyber attacks and cyber fraud. In response, the Riksbank is advising Swedish citizens to have at home at least 2,000 krona ($181) in cash in case of a “crisis or war”. In its 2024 payments report, the central bank also warned of “serious fraud problems that could undermine trust in the payment system.”
Sweden’s near-total abandonment of cash has unleashed a digital crime wave, prompting calls from the central bank to strengthen cash’s role in the economy. After playing more than a bit-part role in the wholesale removal of cash from Sweden’s economy, the Riksbank is now trying to reverse some of the damage it has caused. It is even considering bolstering legislation to force shops that sell government-deemed “essential” goods to accept cash.
The findings of the report may offer a cautionary tale at a time when the dominant narrative around cash — as espoused by senior bankers, central bankers, big tech and fintech executives, politicians and economists, and of course, their ever-faithful servants in the media — is that its demise is all but inevitable, even in countries where cash is still King (Germany, Spain, Austria, Mexico, Thailand, Japan…).
Sweden’s more or less equally cashless Nordic neighbours, Norway and Finland, are in a similar bind. Finland’s economy was until recently forecast to become totally cashless by 2029, but its central bank and government are also having second thoughts, particularly after the government’s decision to join NATO last year, placing it squarely on the front line of NATO’s war with Russia. A couple of weeks ago, Finland hosted its first ever NATO exercises.
In 2022, the Bank of Finland recommended that the use of cash payments be guaranteed by law and urged citizens to have at least three days worth of cash on hand in case of emergency. It’s not only the central bank that appears to be re-evaluating its approach toward cash: so, too, is the general public, with 95% of citizens considering it crucial for cash to continue serving as a valid payment method alongside digital alternatives, according to a 2023 survey by IRO Research for Nosto ATMs.
The war in Ukraine and Finland’s recent membership of NATO appear to have played a role in this shift. According to the survey, the conflict in Ukraine and concerns about supply security have affected the attitude of nearly one-third (28%) of Finns towards cash.
In Norway, where just 3% of in-store purchases involve cash, the government has gone even further by introducing legislation to protect citizens’ rights to use cash. In April, a press release from the Ministry of Justice and Public Security highlighted the importance of cash as an “always on” payment option, ensuring Norway’s economy will not be rendered completely inaccessible in the event of “prolonged power outages, system failure or digital attacks against payment systems and banks”.
Fomenting Fears of Russian Cyber Attacks
Perhaps unsurprisingly, the Daily Telegraph article focuses almost exclusively on the Nordic economies’ vulnerability to a Russian cyber attack, which is only one of the potential threats their payments systems face. The others include power failures and IT outages, neither of which get a mention in the article — perhaps because their inclusion would indicate that the fragility of cashless systems is a broad systemic issue that extends far beyond the risks of a Russian cyber attack.
The Telegraph, like most Anglo-American media, has been fomenting public fears about the risk of a Russian cyber attack since the very first day of Russia’s Special Military Operation in Ukraine. In the third month of the war (April, 2022), cybersecurity authorities from the “Five Eye” nations (US, UK, Australia, Canada and New Zealand) released a joint statement warning that more malicious cyber activity is on the way.
The statement was, above all, an exercise in projection. Both the US and the UK have significant offensive cyber war capabilities of their own, and the US has shown no qualms about using them. US intelligence agencies, at Obama’s behest, have already drawn up a list of potential overseas targets for cyber attacks. They presumably include Venezuela’s electricity grid, which, according to the Maduro government, has twice been the target of a US cyber attack — in 2019 at the height of the attempted Guaidó coup and just a few months ago, in the days following Venezuela’s contested elections.
On both sides of the Ukraine conflict, cyber operations appear to have had a constant but broadly muted impact. Even the Telegraph piece concedes that “Putin’s track record suggests a direct attack is unlikely”. The doomsday predictions of the world’s first ever “cyberwar” have so far not materialised, thankfully. But that hasn’t stopped the constant churn of warnings about Russia’s potential cyber threat. Just last week, the Chancellor of the Duchy of Lancaster Pat McFadden, whose role includes responsibility for national security, told a Nato meeting that the Kremlin could target British businesses and leave millions without power.
The threat is, of course, real: Russia has both the capability and the motive to launch a barrage of cyber attacks against Western targets. As long as NATO continues to escalate its missile attacks on Russia, the motives will grow. That said, European citizens should probably be more worried about what their own governments and central banks are capable of doing to them in a fully cashless economy. Even as Nordic central banks encourage citizens to begin using cash again, the European-wide push for digital public infrastructure continues regardless.
After quietly making digital identity a legal reality across the EU’s 27 economies this year, the EU Commission and the ECB now have their sights set on launching a digital euro in the coming years. Once that happens (assuming it does), it is unclear what kind of role euro cash will have in the Euro Area, but early indications suggest it will be at a disadvantage to the newly launched CBDC. Meanwhile in the UK, there is no telling just how dystopian a Starmer-led Britain could become given it is only in its fifth month. In that brief time, the government has:
- Proposed to create a dedicated digital ID office. Just as his mentor Tony Blair has recommended for years (and as we warned before the election), Starmer is prioritising the implementation of digital ID legislation. Speaking at a conference hosted by his Tony Blair Institute for Global Change (TBI) in central London in July, Blair conceded that the British public will need “a little persuading” to embrace digital ID, a suggestion that elicited rapturous applause and laughter from the audience. My guess is that the British public, like the 350 million citizens of the Euro Area, will have very little say in the matter.
- Unveiled plans to further expand the use of live facial recognition technology,
- Resurrected old Tory plans to grant inspectors at the Department of Work and Pensions increased powers to snoop on claimants’ bank accounts.
- Announced plans to pilot a Central Bank Digital Currency by 2025, carrying on Rishi Sunak’s controversial Digital Pound plans, with a “blueprint” expected by Christmas.
- Launched an unprecedented crackdown on lawful speech. According to a recent expose by Matt Taibbi and Paul Thacker, this crackdown extends far beyond British shores. The ultimate goal is purportedly to destroy Elon Musk’s X platform. The Starmer government is also using powers it already has — namely the UK’s anti-terror laws — to arrest and intimidate pro-Palestinian journalists and activists while participating directly in Israel’s genocide of Gaza.
- Called for the creation of digital health passports for NHS patients (another Blair proposal), prompting a backlash over concerns about digital privacy and the safety of patient data. The recent alleged cyber attacks on hospitals in the North West of England, causing chaos across in-patient and out-patient services, seriously challenges the wisdom of digitising all patient health data. To quote Prof. Sandra Watcher, a data ethics expert at the Oxford Internet Institute, “The idea of a data breach is not a question of if, it’s a question of when.”
Self-Inflicted Outages
The irony is that the worst payments outages of the past decade have been a result not of hostile acts from foreign adversaries but rather botched internal processes by banks, payment processers or third-party IT firms. In 2018, Visa’s Western European card network went down for over 10 hours on a Friday afternoon, plunging the UK and other European countries into chaos as millions of consumers were unable to use their Visa debit or credit cards at points of sale. The credit card company blamed the outage on a “degradation” in its processing system.
In July this year, the world suffered arguably its biggest ever IT outage after a content update by the cyber-security firm CrowdStrike caused millions of Microsoft systems around the world to crash, bringing the operating systems of banks, payment card firms, airlines, hospitals, NHS clinics, retailers and hospitality businesses to a standstill. Businesses were faced with a stark choice: go cash-only, or close until the systems came back online.
Such was the scale of the resulting disruption that even stalwart British media outlets like The Sun, The Times, The Guardian and The Mail ran articles on how the global IT outage had underscored the fragility of a cashless society. The Daily Mail plastered the message across its front page:
The payment outages didn’t stop there. Over the weekend, Italy suffered a prolonged payment outage after construction on gas roadworks damaged payments company Worldline’s network connection. The outage hampered (apologies) sales during Black Friday, costing merchants around $106 million, according to a Reuters report.
On September 12, 250,000 card terminals in Germany — the equivalent of one-in-four of the country’s devices — stopped working, according to FAZ. Once again, the cause of the outage appears to be a software glitch, this time affecting the payment service provider Telecash. On the same day, outages were also reported in the Netherlands. It was the third large payment outage the Netherlands has suffered in just 15 months.
In late October, the Dutch National Bank (DNB) flagged the rising threat posed to the financial system by artificial intelligence, surging cybercrime and system outages. Cyberattacks against the financial sector account for roughly one-quarter of all attacks and can, in extreme cases, “make financial services temporarily unavailable” across the country’s entire financial system, the central bank wrote in its financial stability report.
“You have to take into account that you may not be able to pay by debit card for a longer period of time,” said DNB director Olaf Sleijpen. “Then you have to have cash under the mattress, or be able to pay with QR codes.”
One country that will not be advising citizens to prepare in this way is the UK (quelle surprise!). Although the Head of Britain’s armed forces, Sir Tony Radakin, recently told the Berlin Security Conference that the UK should take a leaf out of Sweden’s book, the Starmer government, like the Sunak government before it, has shown no interest in encouraging cash usage. Its official emergency preparedness guidance advises people to assemble an emergency kit of essentials to survive in the event of disruption – but they do not include cash.
A government spokesman told The Telegraph: “The UK has robust plans in place for a range of potential emergencies that have been developed, refined and tested over many years.” And that, I’m sure, will put our UK-based readers’ concerns at rest.
