So what do the Apollo moon landings, the 2008 financial crash and Covid-19 have in common? It all becomes apparent as NextMoney Editor Neil Martin explains his love of conspiracy theories and why things could be a lot harder for the underbanked as the world comes out of the Covid-19 lockdown.
I adore conspiracy theories. Mindyou, they have to have some level of credence. The recent one about birds being Government built surveillance robots and Covid-19 a crisis that was created so that they could have their batteries topped-up is a little fanciful, even for me.
But, who hasn’t given serious thought about whether Apollo 11 did land on the moon, rather than an elaborate TV set (remember that flag waving in a non-existent moon wind)?
My favourite though has to be the rumour (I read it somewhere, I can’t remember where), that when the ATMs were in danger of running dry at the onset of the 2008 financial crash, the banks turned to people that literally have tonnes of cash, organised crime gangs. It was said that in return for looking the other way, the gangs happily deposited heaps of cash that had been gained through illicit means. And it did everyone a favour. The banks kept the world’s biggest economies afloat and the criminals were able to launder billions of dirty notes.
If ever the phrase cash is king was worthy of mention, it was then.
But what happens when cash is not king, and falls down the ladder to public enemy number one?
The world slump brought on about Covid-19 is not about an economic downturn. Okay, so the global economy was having a bit of a wobble; okay, China and the US were throwing their toys out of the pram at ever greater speed; and, okay, the stock markets were going to have a fall (once the professionals had cashed-in of course). But, this latest economic disaster is not about banks running out of money, or a squeeze on credit, or a ballooning housing market. It’s about a nasty germ called Covid-19 which decided to put in an appearance last Christmas.
And quite early on, there came reports that far from being king, cash was now dirty. Notes of colourful paper were no longer prized – they were dirty, germ spreading sheets used by the virus to infect ever more people.
But hang on a minute I thought when I first read the slightly hysterical stories, who’s pushing this one? Cash is pretty useful and I come from an age that when you used plastic to buy your newspaper and egg sandwich in the morning, it was frowned upon. It took an age to process your card (leading to mumblings in the queue) and the shopkeeper would give you a speech about merchant charges.
It’s all changed now of course. Your mobile is effectively a debit card and no-one bats an eyelid when you use it to buy a Mars bar. Even before Covid-19 entered stage right, on my frequent trips to Amsterdam, cash was considered a bit ‘old hat’. In one shop I was primly told that we don’t take that any more sir, do you have a card? It was though I was offering her a used tissue, not some small change note.
But, I have to agree with the move to plastic. Where I live they don’t like ATMs so, in the past, when you found one (after you’d parked about two miles away), you had to take out a bundle of cash to pay for your coffees and pastries for some way into the future. Now, even the cafes around here prefer not to handle cash and come to the table waving the card reader like a light sabre.
Governments prefer electronic payments of course. It’s a great way to check who’s got money and who’s doing what with it. It’s harder to get paid ‘out of the back pocket’ and it’s harder to dodge taxes when everything is traced within your bank account, which can be accessed by the authorities. Money laundering is also harder and criminals will be forced to be even more inventive when it comes to their dirty laundry.
But here’s the rub of course. If you have a card, if you have a bank account, then you are indeed fortunate. Not everyone has a card though. Nor does everyone have a bank account. There are millions out there who do not have such things. Millions who have to rely on ‘dirty’ cash in order to get through their lives.
And it’s not just the undeveloped world where this is happening.
US store Lululemon has apparently said they won’t take cash when they reopen after the Covid-19 lockdown. Business Insider spotted a note on their website which said that they won’t be taking cash at reopened stores.
It allegedly trilled: “We won’t be accepting cash payments for 30 days after reopen, and we’ll reassess after that time. We prefer contactless tap payments like credit and debit cards or ApplePay. Check in with your financial institution so your digital wallets are ready to go!”
ApplePay, digital wallets and contactless tap payments. It’s a vocabulary which alienates millions of Americans.
The legacy banks aren’t really bothered of course. Making money from people who don’t have much in the first place is a bit of a slog. And why should they bother? Banks are businesses, unless state owned. They are there to run a profit, not support society. Banks enjoy the benefits of dealing with the prime market and for them, the masses are nothing but low margins and administrative trouble. They don’t have the business model to support the subprime market.
So the answer has to be the fintechs. They thrive on volume. With accounts costing cents to run rather than quite a lot of dollars, the fintechs know they can not only accommodate the masses, but they can also make a healthy turn whilst doing so.
Which is why we are in the middle of a fintech Klondyke, as firms rush around the globe spreading the love and ‘converting’ people as fast as they can go. It’s all about winning the hearts and minds of the masses.
And what should emerge are a number of very healthy fintechs and populations which understand what it’s like to be banked.
And not so much filthy lucre.
And that’s the systems working as it should.
Now I haven’t heard a conspiracy theory about fintechs yet (maybe run by alien CEOs intent on nicking Earth’s money and sending it back to a Jupiter in deep recession), but I’ll let you know when I do.
In the meantime, use plastic, it’s cleaner!