How Long Until People Don't Use Coins Anymore?

The traditional approach to South Korea's money denominations would be to demonetize the penny and convert the smallest banknote worth less than $1 into a coin. Instead they are eliminating all the coins, and it follows that $1 and $5 banknotes won't be very useful since you can't get change. All small transactions will switch to electronic.

Sweden has probably the world's smallest supply of circulating banknotes. They also demonetized about half of their coins since they were too big and people had nickel allergies. But instead of eliminating coins like South Korea Sweden designed a new series and issued about 40 new coins per inhabitant in denominations worth roughly 11, 22, and 55 cents.

Banknotes Per inhabitant: Swedish denomination: Value in USD
5 : 20 kr : $2.21
2 : 50 kr : $5.52
3 : 100 kr : $11.03
3 : 200 kr : $22.07
8 : 500 kr : $55.16 (common ATM denomination)
.33 : 1,000 kr : $110.33
21 : Total banknotes per inhabitant at end of 2018

Swedish coins (like those of Norway and Denmark) are all minted in Finland. Swedish banknotes are produced in Britain, while Norwegian and Danish banknotes are produced in France.

A banknote series generally lasts about 20 years. It is difficult to imagine Sweden designing a new series of banknotes. On the other hand if banknotes simply become so rare, they could keep printing the current series for 50 years because fear of counterfeiting will be a non issue since most people don't accept banknotes.

The so called "infrastructure of cash" consisting of ATMs and cash registers, and safes, and armored cars, etc. will seems expensive to keep up after a while. Businesses in Sweden killed the personal check about 30 years ago by charging a $2 handling fee per check. They might completely kill cash by simply not stocking cash registers with coins. You are welcome to pay your bill of 23kr with cash but you must give two 20kr banknotes and forego your change. People will quickly switch to all electronic payments.

It occurs to me that Sweden should take the opposite approach as South Korea and issue large value coins in 20kr, 50kr, and 100kr denominations. That way if they ever stop buying new banknotes, at least people will have some valuable coins at home in case there is a solar pulse that shuts down all the cellular networks for a few days. Coins would become the payment of last resort.

Great thread. I stopped carrying coins and cash several years ago, and virtually every transaction I make is with a credit card. Given the rapidity with which Sweden and China became essentially cashless, I can see it happening here much quicker than people think, perhaps in 20 to 30 years.

Because automated purchases are still relatively backwards. The future should be Amazon GO store where you scan your QR code on the phone, walk in and out and get charged for gum, mints, sandwiches, soda and purchases are anywhere from a fraction of a dollar to a few dollars.

When they abolish coins in South Korea, they are not going to be using debit or credit cards for purchases of less than a dollar. They are going to have cards preloaded with a certain amount of cash.

Of course you could throw down dollar banknotes and think "keep the change", but as there will be no coins "keep the change" will be understood. But that will get old very quick. Since people will start using electronic transactions for everything, there will be a massive drop in demand for $1, $5, and $10 banknotes. Stores will stop installing cash registers which will increase the downward spiral use for cash.

My guess is that within a decade 95% of the cash in circulation will be in the form of the highest denomination (worth ~$50) which will be used primarily for gifts, store of value in private safes, large private purchases on the scale of used automobiles, and gambling.

I do find the different attitudes in different parts of the world very interesting.

I work part time in retail. We don't have anything under $1 to sell, but I routinely accept credit card payments for $4 or $5.
Some customers already use credit cards for absolutely everything. Some always use cash (including peeling off 3 or 4 $50 dollar bills... or paying with a stack of ones and fives, but let's not go there.)

Next door there's a laundromat. The washers, driers and soap dispensers all require quarters. So I also make lots of change for laundromat customers. I remember where I grew up there was a landromat/coin shop. Yep, the owner obviously paid close attention to the change he was processing. SO, that technology hasn;t changed in 50 years, but that's minor in the broad sweep we're considering.

So far, it just seems to be personal preference that prevails, as our (U.S.) institutions are followers rather than leaders in this area compared to other parts of the world.

I don't see any sweeping change happening until boomers (who I think are still anchored in tradition) are completely out of power, and millennials are making all these decisions. That's about 30 years away.

I was in a store today and a guy asked for a cigar at the counter. He paid for it with a credit card. A $1 purchase. I've seen similar things like that at grocery stores but for a little more than $1. Women have no problem paying for anything with a credit or debit card or even a check. Even for an item less than $1. Nothing like getting behind a lady in line to check out at a store and she brings out a check book. People everywhere are using plastic cards for everything more and more.

I am very reluctant to go down that path. But that may be based more on ignorance than any real knowledge.

Interesting that CBS news ran a story on this (cashless businesses) this morning. A couple of important angles they mentioned (also touched on here):
- cash transactions have the possibility to avoid detection for taxation purposes, which will continue to make them popular
- 30% of people earning under $30,000 rely on some kinds of cash transactions

The headline of the story was an eatery in Philly that tried to go cashless, and a local pol introduced a bill trying to prevent it.

Maybe cash will only be the money of choice for criminals and others trying to avoid detection. Sort of like bitcoin, but with actual coins.