How Boris is planting the seeds for the destruction of cash
Promised legal protection for cash is a further nail in its coffin
By Bob Lyddon
SCRATCH beneath the surface and a promise made in The Queen’s Speech on May 10 of legal protection for access to physical cash is an empty one.
The protection claims to be afforded in a new Financial Services and Markets Bill (the ‘Bill’) and one might be forgiven for believing that this will ensure economically viable and convenient services to withdraw and deposit cash, for both consumer and business users.
But the Lobby Pack issued under the Prime Minister’s name [pp. 55-6] blandly states the related objective as ‘Ensuring that people across the UK continue to be able to access their own cash with ease’.
And it is this phrase that contains the seeds of the continuing destruction of physical cash and here’s how:
It accepts the current, degraded level of service as the benchmark, presupposing that ‘people’ can withdraw their own cash with ease now, when they cannot
It ignores the depositing side of the equation
There is no mention of the UK’s 5.6 million private businesses as cash users
There is therefore no mention of businesses’ need to deposit cash if they are to accept it
There is no obligation on businesses to accept cash
There is no acknowledgement of a key advantage for businesses of accepting cash – the business receives the full face value of the sale and not the sale value less the very substantial deductions-from-face-value imposed when payment cards are used. If the business can give out a portion of that cash received as change, or pay suppliers with it, they experience no bank fees and no deductions – and that cannot be permitted.
These deductions, occurring on all payments using either PayPal or a card carrying one of the recognised brands (Visa, Mastercard and to a lesser extent Amex) are a major source of income for banks and they feed an extensive ecosystem of other market actors.
The upswing in online shopping and the reduction in the usage of cash and cheques (brought about as much by banks’ policies as by consumers’ and businesses’ preferences) have dramatically increased this involuntary give-up by businesses of their sales revenues: a contemporary equivalent of coin-clipping.
Ludicrously, a payment using new, digital technology is more expensive: the expense falls on to businesses in the first instance as deductions, which are passed on in the form of higher prices to other businesses and to consumers. Digital payments are inflationary.
The upshot is that the scope of the protection offered by the Bill will at best be the current arrangements after hundreds of bank branches and Automated Teller Machines have been closed, after banks have made it extremely difficult for people and businesses to deposit cash and after the Visa and Mastercard ecosystems have established a lock over UK payments to their own commercial benefit.
Unfortunately, organisations who purport to represent the interests of users have joined in the applause. Which? has lauded the Bill as a result of its own campaigning. It has also, in referring to ‘vulnerable groups’, fallen into a trap laid by the enemies of cash, meaning the proponents of digital payments, including the Payment Systems Regulator or ‘PSR’.
The PSR’s objective is stated in their ‘Access to Cash’ workstream: ‘to support access to cash for UK consumers who need it’. This formulation repeats all the exclusions of the Lobby Pack wording and goes a stage further.
The universe of consumers defined as ‘needing access to cash’ can be much lower than the 70 million inhabitants of the UK, can bypass the universe who might ‘want access to cash’ and can ignore those whose view might be that cash is a normal payment method, it should be their choice whether to use it or not and when and not up to HMTreasury, the Bank of England, groups of payment technocrats or whoever.
Introducing a test of ‘need’ enables the payment technocrats to make a narrow initial definition of the number of people affected and to further whittle the number away via the presentation of their own substitute products.
Substitutes are presented in last week’s report of the PSR’s ‘Digital Payments Initiative’. This initiative ‘was commissioned in response to last year’s Access to Cash Working Group’s recommendation for further work to enable digital payments’.
It is meekly accepted that a group charged with protecting access to cash should instead promote digital payments. The substitute products naturally include offerings in which the major card brands are market actors. The main PSR Panel and its sub-committee responsible for the report enjoy heavy representation from the payment cards ecosystem.
Another substitute is the Government’s Central Bank Digital Currency, also known as Britcoin. The Bank of England panels examining Britcoin contain several of the same individuals and even more of the same organisations as sit on the PSR Panel and its sub-committee, as well as numerous other representatives from the payment cards ecosystem.
Britcoin would be a form of ‘stablecoin’: a cryptocurrency whose value is tied to a reference asset, in this case the UK pound sterling.
The Lobby Pack promises measures in the Bill for ‘the safe adoption of cryptocurrencies’, meaning the creation of the legal basis for Britcoin.
The background is Rishi Sunak’s determination that the UK become a global cryptoasset hub. He simultaneously called for a Non-Fungible Token (‘NFT’) to be minted. Since then Bitcoin has dropped 34 per cent from US$47,000 to $31,000.
Investors in the Terra Luna coin have lost 99 per cent of their money. Stablecoins like Tether and Terra USD (the stablecoin sister of Terra Luna) have lost their parity with their reference asset, and NFT volumes have crashed.
Undeterred the UK payment digitisation show rolls onwards, steered by a technocratic ‘concert party’ consisting of the Chancellor of the Exchequer, HMTreasury, the Bank of England, the PSR, the card-issuing banks, their trade bodies, the members of the wider cards ecosystem, Silicon Valley’s Masters of the Universe and so on.
The attack on physical cash is waged through optically independent and unconnected processes, each of which is predetermined to knock another nail in cash’s coffin, with the panels of pallbearers carefully selected from ‘concert party’ ranks. The Britcoin project is one such process. The PSR’s Digital Payment Initiative is another. The chocolate-fireguard of protection in the new Financial Services and Markets Bill is a third.
Bob Lyddon is an experienced management consultant in banking and payments both privately and with PwC. Bob has acted as advisor to various payment industry actors on UK and international policy and regulation, and been retained as an expert witness. Bob ran the IBOS banking alliance for 13 years, established the Connector banking network while with BankBoston and, with PwC, managed several Euro implementation programmes.