Bookmarked | When Banks Turned Into Casinos

The world over, there is a massive drive to go cashless and embrace the digital mode. While several voices in the big finance and tech space are gung-ho over the prospect of a complete digital takeover, Brett Scott, in his new book Cloudmoney: Cash, Cards, Crypto and the War for Our Wallets, presents a contrarian view.  “I recognise that we are all caught in complex webs – economic, cultural and political – that can simultaneously liberate and imprison us. This book is designed to rebalance the skewed digital finance story, which speaks only of liberation. Think of it as a darker yin to contrast with a brighter yang,” he says, as he goes on to drive home his argument, chapter after chapter.

Here is an excerpt from the book –   

Picture yourself winning big at a casino blackjack table, raking in a pile of chips, then heading to the cashier to convert those to cash and leave. The cashier looks up and says, ‘Sorry, we don’t redeem those any more.’ They let you into their casino, but now are trying to stop you exiting it. Would you be angry?

Something analogous is happening with banks. In countries like the UK they are quietly shutting down ATMs and branches, which are ramps into and out of their systems. According to data from the British Bankers Association and the Office of National Statistics, between 2012 and 2020 the number of UK bank branches declined by 28 per cent, while ATM numbers declined by 24 per cent between 2015 and 2020. Perversely, banks are using their success in absorbing people into their systems as a justification for closing down future opportunities for people to exit. We’ve seen that we live under a dual monetary system  – with state cash and digital bank chips – but in the ‘cashless society’ one of those options disappears, leaving bank chips as the only choice. ‘Cashless society’ is a euphemism  –  as uninformative as calling whisky ‘beerless alcohol’ – but the financial industry likes the phrase because it draws attention to something that is absent, rather than to something that is rising to power. Imagine how much harder it would be to market the ‘bank chip society’

Remember that banks retire our cash from circulation, ‘dematerialise’ it into reserves they own at the central bank, and then issue us chips in their data centres, but they are also supposed to run the reverse process. When we request state money, they have to destroy chips, and re-materialise reserves into cash that they send out via ATMs and branches. But banks have begun to present ATMs as a helpful but outdated public service that they are encumbered with running. It is like a casino presenting the redemption of their chips as a charitable service they offer, rather than a legal requirement. Banks now present themselves like this while slowly closing down the cash infrastructure.

This makes the chief competitor to their chips – cash – harder to access, which in turn makes cash seem less convenient, which in turn pushes more people towards their systems, an influx that is then used to justify closing down further cash infrastructure.

That infrastructure includes bank branches, which are not only being progressively closed, but are also having their cash-handling capacities reduced. In Sweden, for example, many branches refuse to take in cash. So if you are a shop owner who accepts cash, you have to travel further to deposit it at the end of the day. This pushes merchants towards refusing cash – or ‘going cashless’ – which in turn shuts down opportunities for customers to spend cash. We end up with cash being hard to access and hard to spend – a recipe for an implosion in cash usage. In other words, banks are in a position to engineer a self-fulfilling prophesy, and the strategy is succeeding.

Worldwide Google Trends data shows a significant increase in searches for the term ‘cashless’ since 2014. The term, however, now refers both to the general case of a society without cash (‘cashless society’), and to the specific case of a single digital payment (a ‘cashless payment’). In logic, to give identical names to two different things can lead to an equivocation fallacy, in which the separate meanings pollute each other. This is happening when, for example, the French government calls its bank digital payments plan the ‘cashless payments plan’. It is entirely possible for cash and digital bank chips to co-exist but, given that the latter go under the name of ‘cashless payment’, it is impossible to speak about them without implying the end of the former.

With bank-money disguised under the term ‘cashless’ it is no wonder that the issue is so hard for people to discuss clearly. With older generations, making a distinction between ‘money outside the bank’ (cash) and ‘money in the bank’ (bank-chips) still holds, but this distinction risks becoming lost on those coming of age in a situation of digital dominance. For these younger generations, bank-money has gained psychological ascendancy, and they are increasingly swayed by the argument that bank chips could detach from the state money system entirely, requiring no access to cash at all. In this ‘great forgetting’ the ATM becomes seen as an antiquated relic, rather than a means to redeem the promises for state money issued by the banking industry. They are imagining a world in which there is no such thing as ‘money outside the bank’.

This will have serious political, economic and psychological consequences. For example, when a bank looks as though it could fail, people – historically – panic and rush to redeem its chips for state money in what is known as a ‘bank run’: they queue up at ATMs and branches trying to ‘get their money out’. But what happens if there are no ATMs or branches? Well, you are going to have to log onto your account and try to flee your bank by making transfers to another bank, perhaps by asking your friend if you can temporarily transfer to their account. But what if the whole banking sector is in crisis?

(Excerpted from Cloudmoney: Cash, Cards, Crypto and the War for our Wallets By Brett Scott, published by Penguin Random House UK, May 2022)

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