Who Needs Banks?

Digital Wallets -- Be your own bank

I generally dont have much to do with banks. I am invested in various places around the world and most banks aren’t international, despite what they might say.

The only thing that is preventing me for going completely digital is the simple fact that certain systems are still not supporting digital money.

It’s all very well for governments to say they are going to introduce a totally digital financial system, but the plain fact is that the world is not ready for such a system.

The corner shop, which is an essential part of the retail world is not going to go 100% digital without some serious problems.

More to the point, I was caught in the electricity blackout that hit southern Europe back in the early days of the summer. I was about to leave for the airport just as we lost power. I naturally thought it was a local hitch, but soon realised, as we roared down the motorway that all was not well. The first gas station we passed had queues stretching back to the hard shoulder. The second had a queue a mile long. I had enough petrol to get to the airport, but not to get back home.

The airport was, naturally, on local power, which meant we had basic services running, but that was all, and all flights were grounded. After all, it’s wonderful having everything digital, but when there is a power outage everything suddenly no longer works.

No petrol means no deliveries, which means no food reaching the shops.

No electricity means no refrigeration, so food in the shops starts to rot.

Not only can one not get any money, but no tills work, so nobody can pay for anything, so the whole structure of modern society comes to a standstill.

Any country that goes fully digital may as well disband their military because in three days a population which has had its power supply sabotaged has three days before it starts to starve. In fact, most of us need electricity to pump the water into the house. Three days without liquid and people start to die. Those of us with well stocked cellars can now at least keep the liquid coming, even if it is alcoholic.

Okay, so what has brought on this particular call to attention?

I went to my local ATM on monday and got a shock.

I was asked if I wanted to continue with the withdrawal, but the banking system was going to charge me 13.5% for the facility.

13.5%!!!???

That is not just expensive, but downright extortionate. Let’s do some maths.

I was going to withdraw €400, but that was part of a series of withdrawals to pay a builder. I needed a total of €2,000 in cash. 13.5% of that is €270.

Excuse me, but that is No Deal!

Is this an EU directive? Are the banks in so much trouble they have to steal from their customers, because that is what such a charge represents?

But where does that leave people like me?

I am being forced to stop using cash.

OK, I’m a digital guy, so why should I bother?

The answer to that is very simple. Long term, I have no problem, but it is what I call the telephone problem. It’s great to have a telephone, but in the early days who do you phone? It takes a while before other people get connected.

Let me now move over to the other side of the problem.

We are coming to the end of the summer here in Southern Portugal. That means sometime towards the end of October the rains will be back. That means I need to make sure the flat roof is properly waterproofed.

This year I am not getting up there and squirting the appropriate silicone glaze over everything, and so the builders will be coming in to put down a silicon mat. That is what is going to cost €2000.

So how do I pay the builder who wants cash? If I cant get cash from the ATM without paying a €270 premium, which I refuse to do, how do I pay him?

Luckily he has a Paypal account so I can just do a simple transfer which costs me pennies. In short, I bypass the analog banking system, and my fees are reduced to pennies. As I said last week, that is the future. Banks are going to become irrelevant, and we are all going to get ourselves digital wallets, and then one can even cut out Paypal. Disintermediation. It’s the name of the game.

When we all have digital wallets transferring funds will cost not even pennies but fractions of a penny.

With banks charging €273 for a simple transfer how much longer will they stay in business?

In a later blog I’ll tell you how I am getting on with digital mortgages and liquidity pools. They are already here. Are you connected?