Thursday, August 28, 2014

The Money World

"Civilization is the process of setting man free from men"
Ayn Rand

Welcome to The Golden Sense! Times are changing in the banking industry. Just like in many other areas of life, advances in technology are forcing banks to get with the times or fade into obscurity. It is not just the local banks that are forced to change, it is the central banks and the money we use on a daily basis that are due for a big change. The changes taking place are in regard to the privacy of customer information, customer interaction, and the very issuance of money. 

First, regulation and technology are coming head to head. Present day banking portrays anything but a free world. The regulation with which banks must comply is excruciatingly long.

Over the years severe laws have been passed. Many of these laws stem from the war on terror, the war on drugs, or are de facto capital controls due to the U.S. governments ballooning national debt. These regulations force banks to scrutinize every monetary transaction their client makes. The following list is just the tip of the iceberg in regards to regulations enacted on the banking industry:

  • Currency Transaction Report (CTR)- Filed when a customer withdraws more than $10k in cash.
  • Suspicious Activity Report (SAR)- Filed if a customer's behavior is abnormal.
  • Office of Foreign Asset Control (OFAC-) New clients are checked on a wanted list when a bank account is opened.
  • Financial Crimes Enforcement Network (FINCEN)- Bank's must check that no clients are on this "wanted" list periodically.
  • Foreign Account Tax Compliance Act (FATCA)- Foreign Banks must report U.S. customers to the U.S. government.
  • Foreign Bank Account Report (FBAR)- U.S. citizens must file this report when having a bank account in a foreign country exceeding $10k at any point in time during a calendar year.
  • Bank Secrecy Act (BSA)- Money laundering 'prevention'.

Money doesn't freely move throughout the world and there are unintended consequences to these laws. Heavy regulation and reporting requirements invade individual privacy, restrain economic growth, and burden the banking system with heavy expenditures. All these laws are just the beginning. There is so much "fear" in the world that, unfortunately, in the intermediate future more regulation is to come. Due to these complex laws, banks literally have to hire teams of people to form compliance departments to sift through all these rules and regulations.

Secondly, technology is changing the way customers interact with a bank. This is happening in present day and it is a blessing for the customer. Almost everyone uses a debit card or credit card. Payment by plastic is convenient and an easy way to pay for goods and services. Accepting these types of payments are as easy as ever with mobile applications (apps) that you can install on you cell phone. If you receive a check as payment all you have to do is use your mobile deposit app. Simply take a picture of the check and the app sends it to the bank for deposit. Companies that conduct business with a high volume of checks can use a remote deposit system. This is essentially a scanner that processes multiple checks at once and sends the images to the bank for processing. 

The same is true for accepting credit or debit card payments on your mobile phone. Just use an app and a connecting card reader to accept the payment. Technology is making the banking world more efficient as transactions are faster for customers and businesses alike.

Finally, the long term future is as bright as ever when it comes to conducting transactions. New digital currencies are being developed such as Bitcoin. Transactions are made with no middle men – meaning, no banks! Bitcoins are viewed as a legitimate currency because they cannot be reproduced and their value cannot be manipulated. This is a big appeal to users. Also, there are no transaction fees and no need to give your real name. Rest assured, other digital currencies will be developed and exchange for goods and services will be as easy as ever.

Mobile payment will eventually be available as well. The mobile phone user will simply use their device to scan and pay for a product or service. One day the user will be able to choose which currency (domestic, foreign, or digital) they will want to pay with! All this technology will bring incredible power to the individual and create a world with fewer barriers and less red tape.

The intermediate future looks bleak. More regulation and laws will be enacted in the name of some war, cause, or one off event. Rest assured, as always, technology will move faster than any bureaucracy. The individual will benefit from these technological advances and eventually antiquate the overly burdensome regulation. This is going to force change and the world will be better off in the long run.


T. Norman