The popularity of digital payment methods increases rapidly in the world. People start to use mobile wallets, the internet, and mobile banking, and different ways of payments more and more frequently. Although there are many effective strategies to conduct payments online, physical money still performs its functions pretty effectively especially in developing countries where technologies are not quite developed. But in developed countries, people tend to reduce the usage of physical money and Norway is no expectation.
In fact, recently it was announced that Norway is a country where the rate of cash usage is the lowest in the whole world. As the deputy governor of Norway’s central bank claims, Now only 4% of payments are conducted in cash. Norwegians seem to have easily got used to digital payment methods and therefore the share of the cash today is approximately the same as in back to spring. But for the first time ever, the number of operations run in cash in Norway is the lowest not only in Europe but in the whole world and it is probably the consequence of several factors.
Increased use of cryptos
First of all, the number of people using cryptos has increased in Norway. The reason for this may be the accessibility of cryptocurrencies in Norway. Cryptos are legal in Norway and the most frequently used crypto is bitcoin as the taxation system of Norway applies to Bitcoin. Generally, cryptos are used for various purposes like transferring and receiving money on the network, online trading, verification of the transfer of digital assets, purchasing things online, etc. But Norwegians use cryptos mostly for betting on sports in Norway which is one of the most popular gambling activities in this country. As a result of the officially permitted opportunity to use cryptos together with a well-regulated market, the online gambling industry in Norway is currently thriving. Therefore, it’s no surprise that people pay in cryptos for online gambling services as doing this is pretty convenient for them. Increased use of cryptocurrencies can be one of the reasons why the overall cash usage declined in the country because people acknowledged the many benefits of paying with digital currencies.
The impact of Covid-19
Another important reason for a decline in the cash rate can be the coronavirus pandemic. We can certainly say that the virus is the main rival for physical currencies because first of all, exchanging money from the hands of one person to another is one of the most dangerous things today that you can do to your health. Everybody in today’s world now tries to take precautions and avoid personal contacts and paying in cash means nothing more than possessing threats for your health and pushing the virus to spread from one person to another. Therefore, the pandemic has actually changed the way how the world sees money and it is one of the leading reasons why the tendency of switching to digital currencies can be easily detected in today's world.
But also, another reason why the pandemic influenced the cash usage in Norway is the lockdown. The curfew made the people stay at home and during this time the access to most of the stores and services was restricted. The only ones that continue to function were online companies where people paid using digital methods. As statistics show, exactly this was the time when the rate of cash usage dropped down in Norway. During the lockdown, people started to realize that paying online can actually have tons of benefits for customers and as a result, they stopped using physical currencies even after the lockdown was finally finished.
The convenience of online payment
Besides, everybody who wants to fully benefit from today’s technologies and keep up with the trends of the digitized world has to acknowledge that switching to online payment methods can be pretty beneficial for them. Specifically, online payments have so many advantages like low labor costs, as they are usually automatic and cheaper than manual methods such as cheques or money orders. Also, the speed of the transactions is much faster and there is a low risk of theft. In many societies, today stealing cash from strangers or losing money are frequent cases while paying online will definitely help us avoid all of these risks.
But it’s not only about online payment methods but most importantly, online currencies that tend to replace actual ones. The most popular form of digital currencies is Bitcoin which is considered antonyms but still, sometimes when people pay with digital money there is an increased risk of identity theft and lacking the personal information from hackers. But central banks have found a way to avoid all these related risks which is why they are trying hard to implement the innovative CBDCs.
What are CBDCs?
CBDCs are central bank digital currencies that are a digital form of national currencies. Today many leading countries are trying to implement this new trend in their national payment systems, such as China, Denmark, Sweden, and many others. For example, digital yuan has been at the center of the attention of financial researchers and experts from all over the world in the past week. And now the same applies to the Norwegian krone.
The central bank of Norway has announced the development of digital currency as a result of the decreased rate of cash usage. The central bank digital currency has lots of advantages for the economy of Norway because it’s officially issued by the government unlike bitcoin and other cryptos. Also, introducing CBDCs can help the Norwegian krone to remain strong and avoid switching to other digital assets like cryptos, but still, CBDC lacks some strengths of physical currency which is why it’s believed that there is no urgent need to already integrate them in Norway’s financial system. Despite these benefits, cash is still the legal tender that is widely accessible and this is why the country needs to postpone the introduction of CBDC and take more time on analyzing possible outcomes.