E-krona could boost competition and safety, say Swedish retailers

An e-krona could contribute to greater safety and competition in Sweden’s payments market, reported most retail traders in a research work released by Sveriges Riksbank today (October 23).

The exercise analyses consumers’ and retailers’ payment preferences and takes place within the wider central bank’s work on a e-krona, a central bank digital currency (CBDC).

The Riksbank found that both groups are broadly satisfied with the current environment. Nonetheless, consumers yearn for a service able to provide them with an overview of their finances, while retailers want to see greater competition in the payments market reducing transactions’ costs.

These findings stem from in-depth interviews carried out in 2022 and 2023. “The user studies have been an exciting and important part of our work,” says Elin Eliasson, head of the Riksbank’s e-krona division. “Our ability to understand the needs of retail traders and the general public in the payment market is crucial for an e-krona to be useful.”

The public’s focus on an overall perspective on their finances is related to the varied financial service providers they work with. Through different bank accounts and payments providers the public enjoys flexible services. However, consumers highlight the market is not offering an overall solution providing them with a complete view on their assets, consumption patterns and receipt classification.

“I use Excel to create a better overall view. There’s nothing today that’s better than Excel,” said one respondent.

Regarding receipts, “some people create manual spreadsheets”, says the Riksbank study. “Klarna and Kivra offer services to facilitate the handling of payments and receipts.”

Additionally, the public’s feedback added consumers seek to have the capacity to “categorise, and analyse trends in their consumption patterns to be able to plan and control their expenditures”, says the report.

Traders hold a somewhat similar view. They are generally satisfied with the environment, but they think there is room for improvement. They are demanding “increased competition with simple and transparent pricing models”, points out the report. “This is because the payment market is characterised by a few dominant actors, which affects the price picture.”

Businesses prefer real-time payments with fewer steps for the customer. In this regard, they think an e-krona could increase competition.

Resilience and privacy

Asked whether they think a crisis could prevent them from completing transactions, the public seemed confident access to various type of digital payments should be sufficient.

In fact, “there is strong public confidence in the ability of authorities to resolve payment problems in crisis situations”, says the report. “Few have considered that it would be difficult to make payments and think that they will manage if they have several cards, cash and various payment services.”

For most respondents “having cash stowed away for emergency reasons is not perceived as urgent”.

Regarding the possibility of disruptions in the payments infrastructure, many retail traders reported having different types of backup solutions for internet connection and accept several different payment methods, including card payments offline.

“We believe that an e-krona could increase resilience to disruptions, as an additional option if other payment methods are not working,” retailers reported.

Most Swedish people use electronic means of payment as their primary channel to conduct transactions with retailers and between individuals. Nonetheless, “many respondents say they possibility to pay in cash is important and that cash is important for groups in society who do not use digital payment services”.

In contrast to recent social and political debates about electronic payments and CBDCs in countries such as Germany and Austria, where people have expressed their fear that privacy may be breached by this technology, in Sweden this element does not feature prominently.

“Cash is not used for the purpose of making payments anonymously and neither is anonymity something that people miss in digital payments,” says the report. “Anonymous payments are perceived as insecure and people cannot see the point of anonymity except in criminal activities,” it adds. “In fact, verifying your own and the payee’s identity creates a sense of security.”