Thursday, May 9, 2013

Should Libertarians Join the 'Underbanked'?

The underbanked market in the United States is currently estimated at $78 billion in annual transaction fee revenue, serving 68 million consumers, according to a new study by The Center for Financial Services Innovation and Core Innovation and funded by bankster Morgan Stanley.

The study notes:
The market for products used by underserved consumers grew by 7% in 2011 alone, but many of the credit, payment, deposit, and other financial services in this marketplace fail to integrate available technology, leaving tremendous opportunity for disruption through digitization of offerings and democratization of consumer access. 
 Paper-based transactions, inaccessible data, high acquisition costs, and risk models unsuited to identifying attractive borrowers have historically passed high costs on to underserved consumers and kept entrepreneurs at bay.
From the above I find a particularly interesting, this observation:

[...]many of the credit, payment, deposit, and other financial services in this marketplace fail to integrate available technology
and this one:

 Paper-based transactions, inaccessible data [...] have[...]kept entrepreneurs at bay.
Banksters (and the government) just hate money they can't track and money that is difficult to track.

This may be changing. Here's the problem:
 [...]the same technologies that are driving the growth of startups from Silicon Valley to Atlanta are reinventing the marketplace of financial services for underserved consumers. Emerging companies are capitalizing on increasingly robust and inexpensive computing power, ubiquitous consumer Internet and mobile access, and growing demand for comprehensive digital networks. These companies are improving access to effective, high-quality products for underserved consumers while developing technology with broad applications beyond the underbanked market.
They are going to make a play against the untracked cash market.

 The study reports:
[...] a quarter of all US retail transactions are still conducted in cash. [...]While 30% of consumers have been reducing cash usage in recent years, 20% have increased their use of cash.
 Government and the banksters hate this. This is what they want:
 Digital payment networks that allow easy access to cash while also encouraging long-term use of GPR cards for fund storage and transfer are increasingly vital for underserved consumers who prefer cash but are finding themselves drawn into digital payment structures by employers and government benefit offices. GPR prepaid usage volume is expected to grow to $168 billion by 2015.15 New rules now require all federal benefits to be distributed electronically to prepaid cards when direct deposit is unavailable, and private employers are also gravitating toward checkless paychecks, having loaded $31 billion in wages onto payroll cards in 2011.[...] PayPerks provides a platform for prepaid customers that encourages point-of-sale purchases using plastic through educational modules and rewards while discouraging ATM withdrawals. The company’s push to instill digital payments habits in consumers anticipates a future where paycheck or benefit deposits via check are increasingly obsolete.
They are going to pitch the tracking as an enhanced ability for the underbanked to get credit. From the study:
Big Data – that immense plethora of worldwide digital information that is now easily tracked, stored, and analyzed through increasingly powerful technology – is redefining the study of consumer behavior across the economy and raising critical questions about consumer privacy and security in its wake. The availability of digital consumer information continues to expand. The volume of the digital universe is projected to multiply 50 times between 2010 and 2020 to 40 zettabytes (ZB) of usable data.Mobile data traffic alone is currently estimated to be expanding at a compound annual growth rate of 78% through 2016.18 
For the underbanked financial services market in particular, Big Data’s most profound
impact lies in unlocking access to credit.
Bottom line: Tracking is going to get more intense and the push is going to develop to get more to use trackable  spending technologies. One of the most dangerous things a government can do is track its subjects. The bad guys in government will always use such data for evil purposes.

On a personal level it may be wise for libertarians to use cash as much as possible and resist attempts to be pushed into using trackable money spending methods. It also makes sense for libertarians to eCommerce others enter the unbankable area, the more that are unbanked, the more difficult it will be for government to get data on these people. Less data, of course, creates a major impediment to successful government expansion.


  1. One of the first things I changed when I learned to distrust the government was I switched to cash.

  2. This is one of the benefits of buying gold/silver. You automatically become "underbanked".

    I know Lew encourages the use of cash..which is good in your daily transactions...but saving in gold/silver is highly detrimental to the system of fractional reserve as well.