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Why Big Government, Big Banks, and Big Tech All Hate Cash

• By Brendan Brown

Big government, big banks, and big tech are now all on the same side in the war against cash. Government — we all know about already. Big banks — they do not want to see the users of cash in retail transactions (for goods and services) getting keener prices than the users of their electronic payment systems. They use their oligopoly power to suppress as far as possible any such differential emerging (as would be the case in a free market) and so expand the market for their plastic alternative. Big Tech — Amazon would suffer a hemorrhage if its present customers could get substantial discounts by taking cash instead to the mall rather than paying by card online. And advertisers on Facebook and Google would surely cut back if appearances on these platforms no longer had the same potential to initiate instant gratification as many viewers postponed any response until they made their next cash-laden journey to the physical market-place.

Common interest does not always mean mutual assistance, but we can decipher this in the case of the war against cash. Big government realizes that its efforts to limit the use of cash can only succeed if the alternatives (card payments and in particular their online use) are widely attractive. That depends on Big Tech and Big Banks (the latter the supplier of the top used payment cards).  For cooperation between Big Tech and Big Banks, think of Amazon joining up with JPMorgan Chase (and Berkshire Hathaway) in health care provision. Are we to believe that as part of the wider deal Amazon would not strive to get a good terms on merchant fees paid to the JPM card provider and work towards these becoming standard for other card providers in their interaction with its platform? And who knows, Big Tech in its use of Big Data to expand advertising revenues surely can find new ways to exploit private data about customer payments transactions even if without individual names!

We can get a better idea of the common interests of the Big Three in the war against cash by asking how the economic and financial landscape would change were this war ultimately to fail.

If the World Became Pro-Cash

In particular, a US$300 or even $400 banknote could well become the principal means of payment — like the sovereign in pre-1914 Britain which at today's gold price is around $330. Users of cash in retail transactions would get a substantially keener price than the user of cards (whether credit or payments) — consistent with the lower cost of the merchant handling cash than the fee to the card companies (which pays for a vast electronic payments infrastructure including anti-fraud systems and a profit margin on top) and costs related to fraud.

Online business and advertising on Google and Facebook would have shrunk substantially. The Big Banks would have much less revenue from their cards and they would also have lost business, in so far as one factor in the growing market share of the Big Banks has been individuals seeking to get their card services.

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