Despite keeping the matter under radio silence, banks are steadily pushing against cash. Why would banks seek to destroy the very stuff they live off? Banking institutions, it turns out, have found new forms of money which yield far more profit, create less hassle, and secure their central positions within economies.
With the appearance of credit cards, imaterial banking services and mobile banking, electronic money has been nibbling for years at the share of the economy which is held by cash. But new alternatives are not the only reason why cash is being pushed out of the economy. Banks have been waging war on cash for decades. The management of cash is a pricey burden placed upon private banks, which they would gladly see made lighter. ATM maintenance, cash storage and transportation are only a few of the hassles banks deal with. Electronic money, in comparison, is pure gold to banks. There is no delay in deposits: as soon as payment is made, the money is in bank coffers. Electronic money opens up new possibilities, such as high-frequency trading which simply would be unimaginable in the world of cash. Not to mention the fees that banks charge for every electronic transactions.
Private banks, also, are under the control of central banks and governments, which grant and revoke their operating licences. Central banks are fed up with currency, which represents both the un-monitored part of economies, and the reserve of money which they would love to use, when money gets scarce. For this reason, central banks have been tightening the grip on currency, and encouraging private banks to do the same. In recent years, the ECB has lowered the limits on cash payments, and cash transfers. New Europe writes: “Renegotiating the relation between the EU, State, society, our wallets and our cash is a sensitive issue. Within the Eurozone, bail-ins and capital controls have eroded trust in the social contract, national and European. Still, less than a week ago, the European Commission published a proposal to limit the sum of money that can be paid in cash transactions.” To be fair, this push against cash was just as much the doing of the ECB as of the governments that control it, and who are keen to see cash disappear so as to increase taxation.
The last, and perhaps most potent reason is safeguarding from bank runs, namely when interest rates are low. Time reporter Brad Tuttle writes: “To discourage deposits, banks are paying next to nothing in interest on CDs and savings accounts. Some banks have even begun charging fees simply to hold sizeable deposits (over $50 million) made by big institutional clients.” If the ECB had not pushed rates into the ground in recent years, the motivation would have been obvious. But interest rates, which define savings rates and loan rates came to an all-time low at the beginning of the decade, as Brussels was trying to stimulate investment. This resulted, in some case, in negative interest rates, and bank customers being taxes on their savings, instead of generating interests. The logical conclusion for any such customer is to withdraw his or her savings under the form of cash, out of the banking system altogether, to protect it. Massive withdrawals (called bank runs in banker’s parlance) can throw a bank off balance. The less cash is in circulation, the lower the risk, as money could only be transferred from one bank to the other but could never leave the banking network.
A good way to know if banks are truthful when they claim to be carrying out the slow changes in the client’s benefit is to assess the level of publicity given to the lobbying. Despite the sizable changes made in currency management, banks have publicized very few of their moves or decisions. Only the modifications in modus operandi which could hardly be done in the dark, such as suppressing cash completely from agencies, have been accompanied by press releases and statements. When Australian bank Citibank went full cashless in 2016, it claimed to be merely following the desires of its clients, and not driving the revolution, reducing the communication to virtually no official statement. Sydney Morning Herald Clancy Yeates wrote: “Citi is removing cash from its Australian bank branches, because it is no longer worth offering a service that is used by less than one in twenty customers. As consumers embrace digital banking and the role of cash dwindles, the US bank said its six Australian retail branches would remove cash handling services, because of falling demand from customers who instead manage their money digitally.” All other anti-cash moves from banks have happened in deafening media silence, leading some to wonder why cash is slowly disappearing.
From the point of view of a bank, there are simply no reasons to hold on to cash, and there is every reason to shift economies to fully-digital. Therefore, the many calls against cashless societies – for reason ranging from financial inclusion to state sovereignty, and from totalitarian surveillance to environmental awareness – all fall on deaf ears. It is also for the same reason that banking lobbies have managed to keep the debate out of the public eye for so many years – though that may be changing.