A most important development in personal banking occurred in 1967 when a cash machine was put into use by Barclays Bank, Enfield, in the United Kingdom—the world’s first ATM. By 1968, ATMs had been installed in Australia, West Germany, and Spain. BPI was the first bank in the Philippines to deploy an ATM in 1981.
As technology advanced, ATMs became more sophisticated and user-simple. However, with the development of cashless payment solutions in the late 2010s, ATM usage started to decline, with the average number of ATMs dropping to 39 per 100,000 adults from a peak of 41 per 100,000 adults in 2020.
Cashless payments facilitated by the widening use of Smartphones unlocked a new market for banks—people without traditional bank accounts. GCash was launched in 2004 as an SMS-based money transfer service. Mobile payments services are a means of extending financial services to the “unbanked/underbanked” community, estimated to be as much as 50 percent of the world’s adult population. There are currently more GCash accounts than traditional bank accounts in the Philippines.
These mobile payments services can receive deposit transfers from traditional banks but can be “loaded” at places such as convenience stores. Funds then can be used for purchases large and small. Yet another milestone in personal banking.
The next big development occurred in the 2010s with the expansion of cryptocurrencies and its blockchain technology model. The cryptocurrency space matured in the 2020s. Major financial institutions and companies began showing interest in blockchain and cryptocurrencies. The largest crypto, Bitcoin, gained acceptance as a store of value even as its use as a medium of exchange is relatively small.
With the increase in the number of global crypto users, the concept of Central Bank Digital Currencies (CBDC) has gained significant attention in recent years as global central banks explore the idea of issuing their own digital currencies, the first being the People’s Bank of China.
There are several ways for a government to control its citizens beyond government supervision of the food supply, utilities, health care, and employment, which are not subtle. For example, freedom of movement can be restricted. When you move within Germany, you have to register your new address at the local citizens’ office (Bürgeramt) within two weeks of moving. Failure to do so could result in a fine. “Being incorrectly registered could also affect your benefits, insurance and taxes.” And “Your government mandated ID makes it easier for us to help you, Citizen.”
Mis-attributed to Theodore Roosevelt, but widely said in military circles during the Vietnam War, “If you’ve got them by the balls, their hearts and minds will follow.” The ultimate “by the balls” is government having power over your money.
Note the dozens if not hundreds of laws that allow the government to seize your bank account. Note that a court can issue a search warrant for police to check under your bed for “illegal money.” A Central Bank Digital Currency could, in effect, eventually allow the government to track and then totally control your money. With no criticism of Globe, understand that GCash has a record of every transaction you have ever made using GCash. Notwithstanding, I see no probability of a Philippine consumer CBDC in the long foreseeable future. I hope my prediction is accurate.
China’s social credit system expands to all aspects of life, judging citizens’ behavior and trustworthiness. Get ticketed for jaywalking and not pay a court fine or play your music too loud on the train and you could lose certain rights, such as booking a flight or buying a train ticket.
So far there is not any widespread implementation and penalty structure. So far. But in January 2019, even George Soros criticized the social credit system, saying it would give CCP leader Xi Jinping “total control over the people of China.”
Combine the possibility of pervasive CBDC usage and then with a government being “annoyed” with an individual’s or group’s behavior or opinion, and the potential for control of We the People by control of the money becomes the worst possible authoritarian evil nightmare.
“One man with a gun can control 100 without one.”—Vladimir Lenin. The Federal Reserve: “Any CBDC would need to strike an appropriate balance, between safeguarding privacy rights and affording the transparency necessary to deter criminal activity.”
“You can trust us. We’re from the Government.”
E-mail me at mangun@gmail.com. Follow me on Twitter @mangunonmarkets. PSE stock-market information and technical analysis provided by AAA Southeast Equities Inc.