The Silent Closings: Unexplained Bank Account Closures and the Case for Open Money Systems

A recent New York Times story covered a growing trend that is affecting everyday people and small business owners.

Banks are closing customers’ accounts with little in the way of explanation or regard for the ramifications — like the ability to pay bills or make payroll in the case of small businesses.

Bank customers get a letter in the mail saying their institution is closing all of their checking and savings accounts. Their debit and credit cards are shuttered, too. The explanation, if there is one, usually lacks any useful detail.

On its face, or maybe at an individual level, the issue doesn’t seem like that big of a deal. But zoomed out, or when considering its disruptive ripples, the pattern is alarming.

And it all largely comes down to an issue of architecture or infrastructure.

The modern money system is built on a backbone of checkpoints and toll roads, created for safety and legal reasons.

But money systems are based on systems that require permission — that is, someone, somewhere, says, “Yes, you can open an account,” or you are permitted access to financial products based on criteria like credit, employment status, past history, etc.

But the flip side of systems that require permission is that someone can also say, “No, you can’t have access.” Of course, waiting on decisions about access when opening an account or trying to get access to products, like a mortgage, for example, is always hard.

But the situation gets even more complicated when access to financial products is revoked suddenly and without any explanation.

In the process, banks are evicting what appears to be an increasing number of individuals, families, and small-business owners. Often, they don’t have the faintest idea why their banks turned against them.

When that’s the case, access to a basic thing like a bank account can also become a mechanism of control.

To former bank employees, the bloodless data belie the havoc that banks wreak. “There is no humanization to any of this, and it’s all just numbers on a screen,” said Aaron Ansari, who used to program the algorithms that flag suspicious activity. “It’s not ‘No, that is a single mom running a babysitting business.’ “It’s ‘Hey, you’ve checked these boxes for a red flag — you’re out.’”

The power of AI and the need to layer up against robots

Not that long ago, proponents of the need for permissionless money largely focused on equity of access to the financial system.

The need for greater and more equitable access made little sense for most people with open doors to the world’s financial markets.

Even though, according to the FDIC, 4.5 percent of US households are still unbanked (meaning they don’t have a checking account or access to bank services like payment cards), and 14.1 percent of US households are underbanked (meaning they might have access to bank account but more frequently use things like non-bank credit, payday loans for example, to meet financial needs) the need for fair and accessible financial access is often portrayed as a developing market issue.

“I can’t tell if being from a different part of the world makes me an increased risk for the algorithm or if there is bias against me in their decision-making process,” he said.

But current misconceptions aside, what the uptick in ordinary bank consumer account closures tells us is that the need for permissionless money — or at least having a viable permissionless money system isn’t just a good idea for far-flung economies. It’s actually a good idea for everyone — and for a lot of different reasons.

If only a globally distributed and accessible permissionless form of money existed…

Why the world needs open money

The world is changing. And maybe what we are seeing with unexplained bank account closures for routine users is just one of many signs of the times.

But the need for an alternative, more open money system isn’t just about more privacy or personal security or control. It’s also about insulating against some massive macro shifts happening.

Two of the big shifts are the proliferation of artificial intelligence across all digital systems and the changing demographics of the world’s population.

But when he went into the branch, the frustrated manager said more than he was supposed to. “The answer was: ‘Don’t ask me. Ask the computer that flagged you.’”

Taken together, and either one of those things is a big trend, but combined, those changes start to impact larger global systems — and the way that money moves is chief among them.

Open money, which is based on the fundamentals of easy global access without the need for any kind of permission layer, is just one tool or technology that will play a role in helping people push back, or at least hold the line, in terms of the coming big global shifts.

Given the age of AI and the shifting economic forces, having complete control over resources (not to mention the interoperability aspects, which we haven’t even touched on) will become increasingly important to prevent things like algorithms and robots from taking control or shuttering our accounts during the coming times of reorganization.

Also published here.