Time to play devils advocate. For the last ~70 years digital payment cards have been inching their way into our lives. They started as almost novelty Diner cards for people who wanted an open tab that was universal to the restaurants they frequented. From there it has evolved into the primary purchasing strategy for millions of people. The convenience was obvious from the start, but so were the flaws Theft was a simple matter of copying a magnetic strip or stealing the card altogether. But this was only a minor bump in the road to adoption as banks realized they could sway clients by advertising theft protection (often times leaving the seller with the loss). Now protected from theft, debit cards were a hit, and the bank limited the amount spendable as part of this “theft protection” program.
But brick and mortar banks were a common place to go during the week, every week. Cash, savings accounts, all of your money was there, (sometimes that was a literal statement). You could “cash out” at a bank. And people do, every time there is a major recession people try to get their funds from the bank. Imagine the struggle the bank tellers would go through, not having money to give people, and still needing some for their families. Digital to the rescue…
Move banking online. Out of the brick and mortal store and give people a way to ‘play banker’ over their own funds. They can spend, pay-down, move money into savings (not necessarily out of savings) and of course, over draw funds.
The over draw. At first a costly by-product of slow and disconnected systems, the over draw had high fees to incentivize people not to do that. Oddly you can still see these high latency systems at work in the USA whenever you pay for gas, most stations will charge your credit card $1.00 to verify that it is tied to a bank, then send an invoice to your bank who charges you later. I digress. The over draw is the gateway to credit cards. A beautify system of magnets, plastic and interest which permit the holder to pay for nearly anything (within the spending limit) regardless of how much money they have at that time. It’s amazing, proof of funds can be applied for instead of proven. And best of all, you only need to pay a minor portion of the costs you incur and leave the rest with exorbitant interest rates. This has led to the astronomical debt that millions of people find themselves in.
Digital systems saved the banks by moving your interactions with money to the web, on your own time and not on their dime. But debt, will keep you there. The incentives for a bank to accept forms of payment outside of their partnerships do not exist. Banks work together to ensure our daily lives continue (in financial terms) without hiccup. These agreements allow me to exchange a foreign country’s currency for a local one’s because on the back end that bank will get reimbursed and get to charge the foreign bank a fee to get the money, a fee usually transferred to me, the client. So if I bring Bitcoin, to pay-down my debts that will need to be value able to them. But they don’t get fees when they flip XRP for a useful currency, they get to pay transaction fees to a miner. But this is only the blunt side of the blade of debt, the sharp side comes when banks realized that they are not required in the crypto space, and you debt is the only thing keeping you with them. If cryptocurrency was accepted everywhere tomorrow, banks would fight it, raise interest rates on credit card debt and any other means by which to maintain your need to stay in their system. Enslaving you to their bank through your debt.
This, I find to be, an abuse of power.
10cc’s of HOPIUM
Banks are not the bad guy. They are trying to provide a service, and now have new competition in the space with which to motivate change. Debt is also being fought on many fronts and recovery options exist (beware of scams, but you all know that already). I see a world where cryptocurrencies and banks could coexist, trust is earned and not forced with debt.