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The road to a cashless society – Developments in Norway

News | 30.11.17

Banking and finance
FinTech
Over the last few years there has been a debate in Norway about whether Norway should become the world's first cashless society. Industry organisations have come out in favour of the proposition. A committee appointed by the Norwegian Conservative party stated in an interview 7 January 2017 that, in their view, Norway should aim to become a cashless society by 2030.

The road to a cashless society – Developments in Norway

In this article, we will provide an overview of the current Norwegian legal framework pertaining to cash payments and describe some of the legal challenges associated with removing cash from the economy.

1. Introduction
New ways to make payments is a topic that attracts a lot of interest in Norway these days.

The use of physical money in the Norwegian economy is diminishing. New and innovative payment solutions are popping up with a high frequency, and statutory law is to some extent developing accordingly. Technological developments have made it possible to create cost-effective electronic alternatives to banknotes and coins.

Because of these developments a number of market participants have expressed a desire to completely remove cash from the economy. A committee appointed by the Norwegian Conservative party stated in an interview 7 January 2017 that, in their view, Norway should aim to become a cashless society by 2030. The committee proposes that the current right to pay with central bank notes and coins (legal tender), see section 3.1.2 below, be abolished by 2020, followed by further steps to complete the transition and make Norway a cashless society by 2030. The Norwegian parliament, the "Storting", on the other hand, has expressed a desire to strengthen the framework for cash payments, and recently presented a proposal to this effect, hereunder a draft for new regulation on the banks' handling of cash, see section 3.3 below. Furthermore, several of the Norwegian governmental bodies charged with overseeing financial matters have in recent years on occasion expressed their opinion on the matter, see section 3.3.1- 3.3.4.

A great many technological adaptations and administrative and legal changes would be necessary in order to turn Norway into cashless society.

In this article, we will provide an overview of the current Norwegian legal framework pertaining to cash payments and describe some of the legal challenges associated with removing cash from the economy. For instance, a move to a cashless society would require amendments to the legislation regulating the Norwegian monetary system and cash as legal tender (Sentralbankloven section 14; the Norwegian Central Bank Act (NCBA)), the requirements on banks to offer cash (Finansforetaksloven section 16-4; the Financial Entities Act (FEA)) and the consumer's right to make cash payments (Finansavtaleloven section 38; the Norwegian Financial Agreements Act (NFAA)).  There are also other areas where careful considerations would be necessary if such changes were to be made, such as data protection and money laundering issues. These areas will be discussed in Part II. In Part III we will present our overall conclusion.

2. Background
Over the last few years there has been a debate in Norway about whether Norway should become the world's first cashless society. Industry organisations have come out in favour of the proposition, including Finance Norway, The Finance Sector Union of Norway and the Enterprise Federation of Norway (Virke). The Norwegian Tax Administration and the Norwegian Consumer Council also support removing cash from the economy. Their arguments for working towards a cashless society include preventing financial crime, such as money laundering and the underground job market. Other types of crime such as theft and robbery would most likely also become less prevalent if cash is removed from the economy. In addition businesses could potentially benefit from lower costs due to not having to handle cash.  Another point that is highlighted by proponents of a cashless society is that in Norway today, cash is only used for small item transactions and its use is becoming rarer by the day, particularly due to various cash apps such as Vipps, Fitbit Pay and Facebook Messenger.

The arguments against a cashless society include the practicality of using physical money and that the banks' IT-systems and electronic payment systems are not sufficiently reliable at all times in order for society to fully rely on electronic payments. Furthermore, non-profit organizations, the elderly and low-income to no-income citizens could potentially face challenges in a cashless society. Other objections often raised are the challenges a cashless society would pose to those who are not eligible for obtaining bankcards/accounts or persons without identity papers (the "non-bankable" part of the population), and concerns pertaining to too much surveillance from the banks and the authorities. If every single transaction is made electronically, in theory, all transactions can be traced. Such tracking and what this information may be used for by the service providers (for example marketing purposes) is a concern to many. People would also be forced to use banking and payment services for every purchase they want to make.

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