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STOCKHOLM/OSLO (Reuters) - Nordic countries are leading a shift by rich nations towards cashless societies, providing a test case for whether the lower cost and convenience of using cards and smartphones for payments outweigh the risks of fraud and some people being left behind.
Helped by wide use of computers even among the elderly, broad trust in the state and big business and only small black economies, people in Sweden and neighboring countries are fast embracing cards, the Internet and apps for financial transactions, and forsaking notes and coins.
"We are headed more and more for a cashless society," said Jan Digranes, a director at Finance Norway, which represents banks and other financial institutions.
Sweden, home of music streaming firm Spotify and the Candy Crush mobile phone game, ranks top in the European Union for card payments, with 230 transactions per inhabitant in 2012, just above Denmark and Finland and well ahead of Britain on 167, Germany 39 and Italy 28, according to the European Central Bank.
Non-EU members Norway and Iceland are also among top users of cards worldwide, their central banks say.
For banks and businesses, the big benefit is lower costs.
A report by the Norwegian central bank last month said the total cost of each cash transaction -- including handling notes and coins in banks -- was estimated at 7.1 crowns ($0.92) against only 4.1 crowns per card transaction.
For consumers, abandoning cash is often about convenience, though some are worried the poor, elderly and disabled can lack access to technology and credit, or just prefer notes and coins.
Swedes often make the smallest purchases, such as for chewing gum, with a credit card and can use the Swedish banks' jointly-developed smartphone app Swish to repay a small debt to a friend. Another app allow drinkers to buy beers in a bar without queuing.
In the Stockholm subway, it is impossible to buy a ticket with cash, while some unemployed people selling street magazines now also accept electronic payments.
Mike Shabwan, selling flowers on a Stockholm square, said sales had risen by 10 percent since he started use the Swedish service iZettle in his smartphone to accept card payments.
"And it is also cheaper and easier for me because the money comes directly into the bank," he said.
In Denmark, "MobilePay" -- an app launched by Danske Bank to allow payments via a smartphone -- was judged by public radio as the best new word of the year for 2014. It now has 1.8 million users in a nation of 5.6 million people.
But Jarl Dahlfors, chief executive of cash handling firm Loomis, says the cashless trend may have gone too far for "unbanked people" such as many elderly.
And "do we really want everything we buy to be registered?" he asked, touching on the loss of privacy involved in switching from cash purchases to card and online payments.
Then there are the risks of electronic fraud.
According to Swedish Justice Ministry data, electronic fraud has doubled in the country in the past decade to about 140,000 cases in 2013. The boom is partly because a successful Internet-based computer scam can quickly generate thousands of cases.
To limit risks with MobilePay, Danske Bank advises clients to keep their phones locked when not in use and guard them as they would a credit card or cash.
In Norway, Mastercard is experimenting with a fingerprint identification system developed by Norway's Zwipe, embedded into credit cards, hoping to make them more secure.
Anna Eriksson, spokeswoman of the Swedish Association of Senior Citizens, said elderly people need guarantees that cash can be used freely everywhere.
"Maybe we need incentives for older people to get an iPad to learn what's positive about paying bills through a computer," she said.
Still, there are silver linings, even in the rise of electronic fraud. Bank robberies -- which can involve violence -- fell in Sweden to a record low of five in 2012 from 16 the year before.
The Swedish central bank is far from phasing out cash; it will launch new notes and coins this year.
But it predicts the amount of cash in Sweden will fall by between 20 and 50 percent by 2020 compared with 2012.
And as the first generation of Internet users grows older, it seems likely that attachments to notes and coins will fade.
"It is an ongoing evolution," said Peter Fredell, CEO of Swedish Seamless, which developed the payment app Seqr that handles around 3 billion transactions in stores, restaurants and e-trade annually.
Additional reporting by Alistair Scrutton in Stockholm and Eric Auchard in Berlin; Editing by Mark Potter